Afrox posts bottom line profit increase of 42 percent Johannesburg, South Africa, October 30 /PRNewswire/ -- - Profit boost led by industrial African Oxygen Limited (Afrox) once again produced excellent results for the year ended September 2003, recording a net profit increase of 42 percent and increasing net cash inflows from operating activities by 34 percent. This was led by the industrial business, which grew its share of net profits by 61 percent. Afrox's chief executive, Rick Hogben, says, "The results demonstrate our ability to manage our assets and improve competencies within the business. Our marketing and efficiency enhancing initiatives over the past two years have been successful, particularly in our industrial business, which contributed 62 percent of the net profit for the year. This excellent growth occurred in spite of the stronger rand, which had the effect of reducing foreign currency receipts from our global export sales and earnings in Africa. The negative impact on earnings amounted to R40 million. Hogben says the economy and the manufacturing sector were stronger in the first six months of the financial year and sales reflected this with a 17 percent increase. In the second six months, however, the manufacturing sector declined, and Afrox posted a full year 13 percent increase in revenue to reach R7,3 billion (2002: R6,5 billion). For the first time, Afrox's operating profit exceeded R1 billion to reach R1,1 billion (2002: R896 million), an increase of 22 percent. As a result of sound asset management and, partly due to interest rate reductions in the second half of the financial year, net interest paid was down 22 percent to R122 million (2002: R157 million). Earnings per share were up 38 percent at 165 cents (2002: 120 cents). These sound results enabled the board of directors to declare an increased dividend of 83 cents per share (2002: 62,5 cents per share). This dividend is covered two times by earnings. A regular feature of Afrox's results is its strong balance sheet. This year is no exception reflecting the company's ability to focus on quality working capital management. Cash generated from operations increased 24 percent to R1,4 billion assisted by stringent management of debtors days, which were reduced from 53 to 44 days in the industrial business. In spite of a robust capital expenditure and acquisitions programme of R552 million (2002: R497 million), borrowings reduced by R248 million and gearing was down to a record low of 13 percent (2002: 21 percent). Hogben says, "In the past two years we have developed new markets, extended our global customer base, and added to our product and service offerings to existing and new customers. We have optimised our human capital, technology, and production facilities to increase our productivity and global competitiveness. This has helped further to improve Afrox's resilience in most economic cycles." All businesses, Industrial and Special Products (ISP), Process Gas Solutions (PGS), and Healthcare performed well. The drive to improve brand awareness, marketing focus, and to become more customer and service centred, has been rewarded. ISP and PGS posted strong results in spite of a downturn in the manufacturing sector over the past six months. ISP successfully retained its margins and increased market penetration. Handigas recorded another excellent performance reflecting skillful management of fluctuations in the oil price and the rand/dollar exchange rate during the year. In its first full year of trading, the Afrox manufactured AfroxPac 35 self-contained self-rescuers for underground miners obtained substantial local and export orders, making a strong contribution to profits. A vigorous campaign to market Afrox-designed and manufactured gas and welding equipment continues to be successful. Afrox's parent company, The BOC Group, provides access to global markets through its worldwide infrastructure. Although the rand's strength has affected this export drive, growth has been stimulated by forays into new markets in tandem with BOC. "We are excited by new applications and growth opportunities in special gases and packaged chemicals," says Hogben. "In addition, by creating a separate division for medical gases we have broadened our product offering and concentrated on the clinical management of medical products." Hogben stresses that Afrox is constantly developing commercial offers that are tailor- made for different customer segments. He cited retail sales as one example. "We reassessed the location, image and product range of our retail outlets focusing on our calling customers' needs. Since refurbishing our sales centres, enhancing our retail competency, and adding our safety products and personal protective clothing range, sales in this sector have improved significantly." PGS's performance was enhanced by its application of sophisticated technology to produce and improve new and existing processes. Firm pricing trends and initiatives to increase operating efficiencies added to earnings, and ensured that PGS exceeded its targets for the year with increases in revenue of 10 percent and operating profit of 14 percent. Referring to shortages in the supply of carbon dioxide as a result of the Petro SA shutdown, Hogben said that forward planning and product forecasting had ensured that Afrox customers received an uninterrupted supply. It was the only gas company to achieve this. Afrox Healthcare's contribution to revenues and profits were derived from strong organic growth, increased activity, and benefits accruing from the full integration of last year's acquisitions. Michael Flemming, Afrox Healthcare's managing director says he is pleased with the results. "We continue to grow revenues and operating profits and the segmental results show Healthcare to be 28 percent up in operating profit of R550,5 million and 15 percent up in revenue at R4,5 billion." "Growth of Healthcare has been recognised by the Financial Mail, where Afrox Healthcare Limited, as a stand-alone company, was nominated as the 13th best performing company on the JSE Securities Exchange, based on a compound annual growth rate over five years." In July, a joint cautionary announcement was made by Afrox and Afrox Healthcare, which stated that, 'Afrox is in the process of considering its strategic options with regard to its shareholding in Afrox Healthcare Limited. These discussions may or may not lead to a change in Afrox's shareholding.' Hogben said, "As this process has not been finalised, we are unable to make further statements but we expect some conclusion in the near future. When this occurs, a full communications exercise will inform stakeholders." Issued by African Oxygen Limited, For further information contact: Chris Fieldgate +27 011 490 0554 or +27 082 495 1481 or Ros Beart +27 011 490 0712 or +27 082 891 5149. DATASOURCE: Afrox Oxygen Limited Chris Fieldgate +27 011 490 0554 or +27 082 495 1481 or Ros Beart +27 011 490 0712 or +27 082 891 5149.

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