Afrox eyes African expansion

As low market growth is expected in the key manufacturing‚ mining and steel production sectors of the SA economy‚ the company says it will be assessing new growth projects in Africa‚ a key plank in its future strategy. It says it is moving from a "turnaround" phase to a sustained and aggressive growth phase and feels the timing is right as growth prospects in Africa have traditionally lagged SA.

The projected growth in 2013 and beyond is expected to be driven by an anticipated R1.5 billion capital projects programme.

Slow uptake in the key manufacturing‚ mining and steel production sectors of the SA economy led to the company reporting headline earnings per share of 55.1 cents for the six months to June 30 from 52.8 cents a year earlier off net profit of R187 million.

"Overall‚ our outlook for the remainder of the financial year remains optimistic albeit in a challenging business environment‚" the company said.

An interim cash dividend of 27.0 cents per share from 22.0 cents was declared. The dividend is covered 2.0 times by headline earnings per share.

The company cited effective cost management‚ improved plant reliability and a drive to continuously raise customer service levels as a continuing focus‚ but said a mild winter in SA had led to reduced demand for liquefied petroleum gas‚ while demand for bulk gases remained flat.

Sales of compressed gases continued to decline‚ reflecting what the company referred to as the reduction in activity in the manufacturing sector. An exception was the healthcare atmospheric gases which performed well with an increase in volumes during this reporting period. The demand for hard goods‚ however‚ remained sluggish‚ but new product developments are expected to position it well for future growth.

Revenue for the six months was up 9% to R2.8 billion‚ earnings before interest‚ tax‚ while depreciation and amortisation (EBITDA) increased 7% to R446 million compared to the same period last year.

Capital expenditure was R222 million from R154 million‚ while net borrowings were R757 million from R688 million before.

Gearing was 17.9% compared to 17.4% for the same period last year.

Afrox had been placed on Hold by the five brokers cited in I-Net Bridge's consensus. Its share price closed at an unchanged R19‚ but is off its one year of 21.40 seen in May.