Industrial and welding gas & consumables group African Oxygen (Afrox) revised its outlook recently, advising shareholders that it no longer expected financial results for the second half of the year to improve.
Perhaps indicative of the strained financial climate that industry finds itself in, Afrox has lessened its optimism for the close of the financial year.
In August, when the group released interim results, Afrox stated that it expected the second half of the year to improve, on the back of benefits arising from its expansion and restructuring plans.
However, the company has now said that, given challenging operating conditions during the third quarter ended 30th September and slowing domestic economic conditions, the outlook had turned negative.
In a statement to shareholders citing a more realistic trading forecast, the group said, “Given the current market conditions, Afrox expects the negative trend experienced to continue beyond the third-quarter.”
The company has also said it would implement strategies to identify, manage and reduce the risks posed by the uncertainties of the global economic environment.
Meanwhile, Afrox’s current R1-bn capital expenditure (CAPEX) programme, which began in 2006, is due for completion in 2009.
The company has invested in the construction of up-to-date facilities at the cylinder filling hub, in Germiston, and the metal inert gas-wire factory, in Brits. Furthermore, Afrox has invested in liquid petroleum gas (LPG) importation storage facilities at Richards Bay, with bulk tankers and cylinders, and commissioned three new air separation plants at Wadeville, Lydenburg and Richards Bay - which will provide the offtake for the merchant market.
During 2008, the Kuilsriver air-separation unit and liquefier were commissioned for supply to the merchant market. In addition, a carbon dioxide liquefier is coming on-stream at Sasolburg to accommodate merchant demand in the bottling and hospitality markets, which have experienced shortages in the past.
Afrox operates as The Linde Group’s regional business unit for sub-Saharan Africa. Growth in many sub-Saharan markets outstrips most developed economies today, with GDP in some African countries at an impressive 20% (Angola) at present - meaning key growth potential for Afrox.
“As part of Linde Group, a Fortune Global 500 company, Afrox enjoys a significant competitive advantage with access to global best practices, knowledge, research and technologies,” the company states.