AFROX, a member of the Linde Group, has released interim results for the period ended 30th June 2017.
During the six months under review, Afrox increased both revenue and Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) as a result of an increase in volumes, recovery of cost inflation from pricing and continued effective cost containment.
As a result of the improvement in volumes in certain sectors of the business, revenue increased by 6.8% to ZAR 2.8bn ($216m). The growth in revenue was achieved despite the continued weakness in the South African economy. The volume improvement, supported by effective cost management, led to an increase of 10.5% in EBITDA to ZAR 578m ($44m).
The improvement in profitability and the continued focus on balance sheet optimisation resulted in a net cash position of ZAR 194m ($14m). Capital expenditure of ZAR 169m ($13m) is in line with prior years, and reflects the lack of growth in demand in the current economic climate and the adequate production capacity of the Group.
Return on capital employed (ROCE) improved by 380 bps to 22.4% (2016: 18.6%) from higher profits and asset optimisation.
Overall revenue increased by 8.3% compared to 2016 as a result of volume growth in most sectors, combined with effective price management.
Within Industrial Gases (acetylene, oxygen, nitrogen and argon), the demand for AFROX’s bulk products was above the comparative period, resulting in increased volumes in most sectors.
On-site revenue increased from new business and expansion at existing customers, despite the impact of major plant outages. Packaged Gases volumes were at prior-year levels, with small recoveries in demand for oxygen for various applications.
The successful introduction of AFROX’s new cylinder management system ‘Track & Trace’ and the implementation of more effective pricing management, resulted in an improvement in revenue compared to the comparative period.
The growth in Medical Gases revenue was as a result of Afrox’s strong combined product and service offering and tailor-made solutions for the increasing demand in the public and private hospital sector, as well as the growing Homecare market.
Hospitality Gases and Special Gases experienced reduced revenue due to volume decline in some areas. Carbon dioxide (CO2) bulk supply was constrained due to limited product availability at AFROX’s major source, resulting in supply shortages to large customers.
Gross profit after distribution expenses (GPADE) margins further improved from efficiencies in operations and distribution. Improved cost recoveries across most businesses, coupled with the contribution from higher volumes, resulted in the 130 bps improvement in margin.