The Managing Director of African Oxygen Limited has said that 2008 was undoubtedly one of the company’s most challenging years.

Last week, Afrox, the largest gases and welding products supplier in South Africa, released its year-end financial results for 2008.

Revenue increased by 18% to R5.7bn and operating profit declined by 10% to R753mn compared to the previous year.

Operating profit margin dropped to 13% from 17% as a result of the difficult economic environment, particularly in the fourth quarter.

Accordingly, net attributable profit of R412mn, and earnings per share of 133.7 cents, were 11% lower.

Operating cash flow of R1bn met expectations but the increase in net working capital was higher than planned, mainly as a result of higher inventory and trade receivable levels.

In a press release, the company claimed that group gearing of 32% was ‘acceptable’ at the peak of an investment cycle, and that EBITDA interest cover of eight times is well above its minimum threshold.

Tjaart Kruger, Afrox Managing Director said, “This has undoubtedly been one of the most challenging years for Afrox. The global economic crisis, and the ensuing retreat in consumer spending, is in chilling contrast to the effusiveness of recent times.”

He added, “World markets remain rudderless and no improvements are expected in the short to medium-term. The impact on South Africa has been rapid and overall economic activities have declined sharply.”

“Afrox faced steadily deteriorating trading conditions during the second half, with the final quarter particularly depressed.”

The company said its African Operations achieved excellent results at good margin for the year, contributing a record 23% of group profits; however, it predicted deteriorating conditions towards the end of the year due to the impact of the lower commodity prices.

Focal points for the company in 2009 include tighter working capital management, reducing overhead cost, minimising the cost and complexity of doing business, and preserving liquidity at a time when credit is light.

No improvement in trading conditions is expected before 2010; the company said that until such time as general confidence returns, its traditional customer base will remain under extreme pressure.