Sub-Sahara’s leading gases and welding company, African Oxygen Limited (Afrox), has confirmed operational and structural changes to deliver R200 million (approx. $23.8m) in cost savings by the end of 2009.
The measures announced at its 7th May AGM will see a reduction in Afrox’s filling sites, the elimination of minimally profitable or slow moving product ranges, and optimisation of routes to market.
In addition, a review of all outlets is complete and the closure of branches that do not meet minimum return thresholds is underway – while the company notes that a head-count reduction of almost 15% will be achieved by the third quarter.
Mitigating the impact of the global economic crisis and minimising outlay during a time of uncertain forecasting are cited as the reasons for the structural changes.
Managing Director, Tjaart Kruger, explained in a statement, “The current actions being implemented, albeit addressing immediate requirements, are in fact strategically correct to ensure long-term sustainability. We look to these measures to mitigate the impact of the global crisis and, together, I believe, they place the company firmly on the road to realising its potential.”
“In today’s economic climate, forecasting is difficult, leaving us with the only option to manage efficiencies, reduce cost, and maximise cash to our full ability. Change management requirements are huge. The current external pressures and internal changes to the company require the biggest culture change Afrox has ever experienced. The challenges of changing this culture should not be underestimated.”
Kruger also told shareholders how 2008 was less a year of two halves and more a year of quarters, with each period progressively worse than the previous and by the fourth quarter, each month significantly more depressed than the last.
The company’s African operations did actually achieve excellent results at a good margin, contributing a record 23% of group profits.
“The R1-billion of capital expenditure programme, referred to in the previous trading period, continued in 2008 with the remaining project, the Gases Operations Centre in Germiston, to be finished this year,” said Kruger.
“As a result, the carbon dioxide plant was successfully commissioned in the last quarter of 2008, and the Kuilsriver air separation unit has now been commissioned. Competitor activity was noticeably fiercer in 2008 as economic conditions worsened and, going forward, a rigorous pricing regime is the order of the day to protect market share.”