STRONGER
YEARS
F I N A N C I A L R E S U LT S A N D
D I V ID EN D D ECLARATION
for the year ended 31 December 2016
Contents
Investor presentation
1
Commentary
27
Financial features
27
Abridged audited consolidated statement of financial position
32
Abridged audited consolidated income statement
33
Abridged audited consolidated statement of comprehensive income
34
Abridged audited consolidated statement of cash flows
35
Abridged audited consolidated statement of changes in equity
36
Segmental report
37
Statistics and ratios
38
Selected notes to the abridged audited consolidated financial statements
39
1
Financial results and dividend declaration for the year ended 31 December 2016
1
Presentation Outline
1. Performance Summary
2. Performance Drivers
3. Afrox Financial Results Analysed
4. Turnaround Update
5. Key Project Update & Outlook
6. Appendices
2
2
African Oxygen Limited
Performance Summary
3
Financial results and dividend declaration for the year ended 31 December 2016
3
2016 Highlights
Top 10 topics
 Reported revenue up 1.2%; excluding ArcelorMittal South Africa Limited (AMSA) (+R165m) and LPG
pass through (-R47m) revenue declined 1.0% driven by lower volumes and supply constraints in H1
 EBITDA of R1 237m up 23.2% with margin improvement of 400bps to 22.3%, reflecting litigation
settlement, benefits of turnaround and countermeasures against strong headwinds
 Atmospheric gases saw improvements in all sectors in H2, however, Price Cost Recovery (PCR) for SA
remains an area of focus
 LPG maintains strong price discipline with higher GPADE (+15.1%) in spite of overall lower volumes
from refinery shut downs
 Hard Goods business saw some stabilisation in H2 from improvements in some key sectors
 Emerging Africa impacted by currency effects, however, overall performance at PY levels
 Completion of Cornubia land disposal, pension contribution changes, and business growth supported
Operating Cash Flow. Overall decline in Operating Cash Flow was due to higher dividend payments
year-on-year
 HEPS increased by 36.1% and EPS by 44% vs. PY
 ROCE, with significant improvement from EBIT, grew 790bps from 16.7% to 24.6%
 Capex to Sales ratio reduced from 6.9% to 6.8%
4
4
African Oxygen Limited
SHEQ Performance
Significant MIR reduction since 2009
Comments
MIR trend*
 Maintained reduced MIRs of 70% during the period
2013-2016 compared to the period 2009-2012
31
 Over 55% of the MIRs in 2016 were related to
security incidents
28
 Lost Time Injury (LTI) increased from 9 in 2015 to 15
in 2016
25
22
 40% of the LTIs in 2016 were related to manual
handling
 Truck Severity level 1 and 2 decreased by 50% from 6
incidents in 2015 to 3 incidents in 2016
8
2009
2010
2011
2012
2013
6
2014
8
2015
9
2016
 Passenger Car Severity level 1 and 2 decreased
significantly by 87% from 8 incidents in 2015 to 1
incident in 2016
 Our SHEQ programmes continue to be monitored and
adapted to focus on improvement in safe driving,
manual handling and security
* A MIR is an incident with a major outcome and consequences which represents a significant
non-compliance with Afrox's Safety, Security, Health, Environment and Quality (SHEQ) Policy
Financial results and dividend declaration for the year ended 31 December 2016
5
5
Performance Drivers
6
African Oxygen Limited
Progress Against Strategic Topics
By business segment
Prev. Latest
Atmospheric Gases
Increase EBITDA from restructure
New CO2 sources
Increase asset utilisation and reliability
Go-to-market strategy
Growth in new applications
Price Cost Recovery 100% of cost inflation
LPG
Leading margin management
Security of supply
Return on investment in cylinders
Go-to-market model relative to industrial gases
Ongoing focus on controlling illegal fillers and risk
Emerging Africa
Reduce supply chain costs and increase customer supply security
Infrastructure in place for growth
Ensure critical mass per country and improvement in governance
Sales capability development
Hard Goods
Explore new markets
Right size fixed costs to throughput
Grow and defend local volumes
Not started
Work in progress
Complete
New
7
Financial results and dividend declaration for the year ended 31 December 2016
7
Afrox Financial Results Analysed
8
8
African Oxygen Limited
Performance 31 December 2016
Highlights
ZARm
2015
2016
Revenue
5 473
5 537
EBITDA
1 004
1 237
+23.2%
18.3%
22.3%
+400bps
Operating Cash Flow
676
573
-15.2%
Headline EPS (cents)
139.2
189.4
+36.1%
Reported EPS (cents)
134.2
193.3
+44.0%
16.7%
24.6%
+790bps
EBITDA margin
ROCE
YoY
+1.2%¹
 Revenue supported by R165m AMSA settlement, however, adverse market conditions and supply chain constraints have
continued to impact revenue development
 EBITDA growth reflects restructuring initiatives delivered as planned, with R161m from AMSA settlement helping to offset
market conditions and supply chain challenges
 Operating Cash Flow remains strong but reflects higher dividend payments and return to normal effective tax rate
 Business performance and asset optimisation drove ROCE up to 24.6% (21.4% exclude AMSA settlement)
¹ Without adverse effect from LPG market prices (-R47m), underlying revenue improved by +2.0%
Financial results and dividend declaration for the year ended 31 December 2016
9
9
Business Performance
Improved performance in H2 2016 across most businesses
Atmospheric Gases
LPG
+9.9%
Revenue1
-1.2%
-15.5%
0.0%
1 820
1 797
788
2016
2015
2016
2015
+27.5%
681
321
666
2016
755
755
2015
2016
-14.7%
+15.1%
868
GPADE1,2
Emerging Africa
2 319
2 110
2015
Hard Goods
+1.3%*
369
272
-1.6%
232
311
306
% margin
(32.3%)
(37.4%)
(17.6%)
(20.5%)
(34.5%)
(34.8%)
(41.2%)
(40.5%)
2015
2016
2015
2016
2015
2016
2015
2016
¹ Numbers shown on an adjusted basis with segments adjusted to align with how businesses are managed, and allocation of costs between businesses have been updated to better reflect
the split of operational costs | 2 GPADE is gross profit after distribution expenses
* Excluding change in market LPG prices
10
African Oxygen Limited
10
Atmospheric Gases
Challenging market and supply conditions
Financials
Sales
2 110
+9.9%
GPADE
681
Atmospheric sales by market sector
2 319
+27.5%
2 110
+2.1%*
868
(32.3%)
(37.4%)
2015
2016
+3.2%*
2 319
312
185
+2%
+0%
698
+30%
189
326
86
483
195
346
89
+3%
2015
2016
Food & Beverages
Petrochemical
305
185
Steel Industry
537
Mining
Healthcare
Automotive
Other
493
+6%
+3%
+3%
 Once-off AMSA settlement FY impact R165m
 Diversification supports sales in tough economic conditions
 Market conditions improved and supply constraints eased in
H2
 Food sector growth supported by new applications
 Recovery of cost inflation from customers challenging
 Underlying improvement in margins due to productivity
benefits from ‘SWIFT’ turnaround
 H2 improvements seen in Mining, Steel and Petrochemical
 Strong Healthcare growth reflects macro trend
 Once-off AMSA settlement impact of R165m incl. 2016 Steel
Industry sales (-1% excl. AMSA settlement)
11
* Excluding AMSA
Financial results and dividend declaration for the year ended 31 December 2016
11
LPG
Strong performance with improved supply chain
Financials
Volume (KT) development 2014-16
1 820
1 797
+1.3%*
+2.7%
-3.1%
+0.2%
-5.6%
+7%
+1%
Sales
-1.2%
2014
+15.1%
Margin per ton development Jan-13 to Dec-16
321
369
(17.6%)
(20.5%)
2015
2016
 Underlying demand continues to grow, with volumes
impacted by H1 supply chain issues
 Changes mean confidence in supply chain going forward
 Strong margin management discipline established
* Excluding change in LPG market prices
12
African Oxygen Limited
2016
Bulk
Jan 13
Mar 13
May 13
Jul 13
Sep 13
Nov 13
Jan 14
Mar 14
May 14
Jul 14
Sep 14
Nov 14
Jan 15
Mar 15
May 15
Jul 15
Sep 15
Nov 15
Jan 16
Mar 16
May 16
Jul 16
Sep 16
Nov 16
GPADE
2015
Cylinder
gas price/ton
gas cost/ton
12
Hard Goods
Market stabilised in H2
Financials
Sales
Development
400
788
Sales
388
336
330
666
-15.5%
GPADE
GPADE
272
(34.5%)
-14.7%
232
(34.8%)
148
124
114
118
(37%)
(32%)
(33%)
(36%)
15H1
15H2
16H1
16H2
 Volumes impacted by lower demand in manufacturing
and mining sectors
 Pricing pressures impacted margins
2015
2016
 Volumes into some key sectors stabilised in H2
 Margins started to benefit from the stronger ZAR
13
Financial results and dividend declaration for the year ended 31 December 2016
13
Emerging Africa
Performance impacted by currency movement & LPG shortages
Financials*
755
Sales
0.0%
755
+9%
Underlying performance
 Volumes still growing but impacted by weaker
market conditions
 CO2 and LPG shortages in H1
 Currency devaluations leading to high imported
inflation and frequent price increases
GPADE
 Outlook is improving with increase in commodity
prices
-1.6%
311
(41.2%)
+4%
2015
306
(40.5%)
 Strong footprint across Africa provides for
opportunities
2016
 Reported financials impacted by currency effects,
LPG pass through and DRC exit
 Underlying sales up 9% & GPADE up 4%
*Underlying financials excluding the impact of LPG pass through, currency translation, and exit from DRC
14
African Oxygen Limited
14
Other Operating Expenses & FTE Development
Effect of turnaround materialised
Other operating expenses*
971
FTE development
-25.0%
917
-5.6%
2015
2016
 H2 16 vs. H2 15 impacted adversely by effects from
currency
2014
2015
2016
 FTE reduction delivered in line with ‘SWIFT’ turnaround plan
 FTE replacements deferred aligning to external
environment
15
* Excluding impairments and restructuring cost
Financial results and dividend declaration for the year ended 31 December 2016
15
Financial Performance: Key indicators
Strong financial position with net cash and improved ROCE
Cash Flow 2015 vs. 2016
Financial KPIs
2015
2016
∆ in %
676
573
-15.2
(321)
(272)
+12.2
Free Cash Flow
355
301
-15.2
Cash at the end of the period
852
1 153
+35.3
ZARm
Operating Cash Flow
Investments & Financing
0.8
0.7
0.6
0.1
Net debt/
EBITDA
-0.1
24.6
ROCE in %
10.9
12.2
11.1
2012
2013
2014
16.7
2015
2016

Free cash flow reflects increase in dividend payments and increased tax payments

Net debt continued to fall relative to EBITDA due to significant EBIDTA growth and capital efficiencies

ROCE improvement has now exceeded our mid-term guidance
16
16
African Oxygen Limited
Turnaround Update
17
Financial results and dividend declaration for the year ended 31 December 2016
17
Restructure Costs and Benefits
Delivered as planned
Costs
 Full costs posted and final
for ‘Get Healthy’ phase of
turnaround
Restructuring¹ costs &
total programme benefits
ZARm impact from 2014 to 2016
450
 Costs reflective of 2014 and
2015 restructuring expenses
 Restructuring costs covering
Benefits
343
• redundancy
• outsourcing

Delivered
• closure of operations
• SKU reduction
• consultant support
1 Restructuring includes impairment charges
18
African Oxygen Limited
Costs
Savings
18
EBITDA Development 2014 to 2016
Strong headwinds expected to reduce
EBITDA 2014
818
Impact in
2014-2016
Headwinds
 Political instability
161
Once-off’s 1
Impact in
2017
 CO2 supply chain issues
 LPG supply chain issues
Restructuring 2
450
+419
(+51,2%)
 Poor plant reliability
 Not recovering cost inflation
 Slump in commodity prices
Headwinds
192
EBITDA 2016
Headwinds expected to reduce in 2017
1 237
High
Medium
Low
1 Litigation settlement with AMSA
2 Restructuring savings from a
19
2 year programme
Financial results and dividend declaration for the year ended 31 December 2016
19
Key Project Update & Outlook
20
African Oxygen Limited
Key Project Update
Durban Filling Plant
Port Elizabeth ASU
 Project completed
 The PE ASU performing as expected and recent contract
expansion with additional volumes
 Afrox successfully disposed of all 3 portions of the
Cornubia land
21
Financial results and dividend declaration for the year ended 31 December 2016
21
Key Project Update
Cont.
Waste to Biogas Project
eCommerce Platform Update
2016 Registrations
8 877
7 532
5 536
3 245
Q1
2 291
1 996
Q2
Q3
Cumulative registrations
1 345
Q4
Total registrations per quarter
 Afrox signed take-off agreement with bio-tech start-up,
New Horizons Energy
 9% of all delivered orders via eCommerce platform
 Useable CNG will be extracted in the form of Methane as
well as CO2 for use in industry‚ agriculture and waste-water
treatment
 103 353 total registered users, 232 407 total visitors and
1.2 million pages viewed
 8 877 legal entities registered for eCommerce YTD
22
22
African Oxygen Limited
Outlook
 Maintain core Hard Goods and Industrial Gas business
 Focus on Price Cost Recovery (PCR)
 Improve asset utilisation
 Grow Special Gases, CO2, Healthcare, LPG and Rest of Africa
 Maintain current ROCE levels of 20%+
Not confident
Very confident
23
Financial results and dividend declaration for the year ended 31 December 2016
23
THANK YOU
24
24
African Oxygen Limited
Definition of Key Financial Figures
GPADE
SG&A
EBITDA
Gross Profit after Distribution Expenses
Selling, marketing and general
administration costs
EBIT before non-recurring items adjusted
for amortisation of intangible assets and
depreciation of tangible assets
Return on Capital Employed (ROCE)
EBIT
before non-recurring items
Headline Earnings per Share (HEPS)
before non-recurring items
Profit for the period
before non-trading items
Earnings per Share (EPS)
Profit for the period
attributable to Afrox shareholders
attributable to Afrox shareholders
Average Capital Employed
Equity (incl. non-controlling interests)
+ financial debt
+ liabilities from finance leases
- cash, cash equivalents & securities
- receivables from finance leases
Number of
weighted average
outstanding shares
Number of
weighted average
outstanding shares
25
Appendix. I
Financial results and dividend declaration for the year ended 31 December 2016
25
Investor Calendar 2017
AGM
25 May 2017
Year-end Results Released
23 February 2017
Year-end Investor and Analyst Presentation
23 February 2017
2017 Interim Investor and Analyst Presentation
7 September 2017
Contact
Phone:
+27 11 490 0400
Email:
[email protected]
Website: www.afrox.co.za
26
26
African Oxygen Limited
Commentary
Performance highlights
Afrox increased revenue and EBITDA despite a challenging environment.
The benefits from the successful restructuring and litigation settlement with
AMSA resulted in EBITDA increasing by 23.2%, or R233 million, to R1.237 billion
for the year ended 31 December 2016. This growth was achieved despite the
weakness of the South African economy and supply constraints seen in
CO2 and LPG.
Revenue was up 1.2% at R5.537 billion (2015: R5.473 billion). EBITDA margin
increased by 400bps to 22.3% (2015: 18.3%). The overall improvement in the
EBITDA contributed to headline earnings per share increasing by 36% to
189.4 cents (2015: 139.2 cents) and basic earnings per share increasing by
44% to 193.3 cents (2015: 134.2 cents). Return on capital employed (ROCE)
improved by 790 bps to 24.6% (2015: 16.7%).
Financial features
Revenue
R5.537 billion
EBITDA
R1.237 billion
Earnings before interest and taxation
R848 million
Increase of 1.2% from R5.473 billion
at 31 December 2015
Increase of 23.2% from R1.004 billion
at 31 December 2015
Increase of 66.9% from R508 million
at 31 December 2015
Earnings per share
193.3 cents
Headline earnings per share
189.4 cents
Cash generated from operations
R1.099 billion
Increase of 44% from 134.2 cents
at 31 December 2015
Increase of 36.1% from 139.2 cents
at 31 December 2015
Increase of 18.7% from R926 million
at 31 December 2015
Financial results and dividend declaration for the year ended 31 December 2016
27
Commentary continued
Atmospheric Gases
KPI
Revenue
GPADE1
Margin
GPADE1
Up by 27.5%
R868 million
Revenue
Up by 9.9%
R2.319 billion
Achievements
• Expansion of customer contract at new PE plant
• Settlement in litigation led to additional revenue
• Increase in bulk volumes despite challenging environment
• Cost reductions from site consolidations and plant efficiencies
Key challenges
• Difficult trading environment and political uncertainty
• Constrained CO2 supply from supplier plant shutdown
• Current overcapacity in the markets
• Electricity supply and water shortages affecting production sites
1
Gross profit after distribution expenses.
28
African Oxygen Limited
Unit
2016
2015
Rm
Rm
%
2 319
868
37.4
2 110
681
32.3
Overall revenue has increased by 9.9% compared to full year 2015 as a result
of the litigation settlement and growth in some sectors. The underlying
improvement in revenue despite difficult economic conditions demonstrates
the stability of our core business. Volumes were lower in the first half of the
year due to a combination of weak market conditions and CO2 supply
shortages. In the second half of the year there was a recovery in most sectors
with CO2 availability improving (although still constrained) as well as market
conditions. Margins improved due to the litigation settlement and on an
underlying basis due to efficiencies from the restructuring activities completed
in 2015. Across all businesses the recovery of cost increases from the market
was not sufficient and it is essential that this improves in 2017.
Within Industrial Gases (acetylene, oxygen, nitrogen and argon) the demand
for our bulk products was approximately 2% above 2015 levels. Growth,
particularly in the food and gold mining sectors, more than offset by the
reduction in demand from the iron and steel sector and constrained availability
of CO2 in first and fourth quarter due to plant shutdowns at one of our major
sources. Our on-site volumes are slightly lower compared to prior year mainly
from a customer plant closure with the expansion at another customer not
quite enough to offset. Packaged gases reported lower demand with the
biggest variances on oxygen due to reduced activities in the recycling and
scrap metal business driven by lower steel prices. Medical gases saw an
increase in volumes and margins as a result of higher demand in the public
and private sectors. Both Hospitality gases and Special gases saw increased
sales and volumes from higher demand.
LPG
KPI
Revenue
GPADE1
Margin
Revenue
Down by 1.2%
R1.797 million
GPADE1
Up by 15.1%
R369 million
Achievements
• Debottlenecking import facility to secure Afrox supply position
• Leverage benefits from higher imports with supply chain efficiencies
• Improved customer service levels at periods of peak demands
• Better pricing with full recovery of product and distribution cost
Key challenges
• Logistical challenges regarding LPG supply in the Western Cape
• First half of the year supply constraints from local refineries
• Proposed new regulations of the competition commission
• Illegal cylinder filling of rogue operators
1
Gross profit after distribution expenses.
Unit
2016
2015
Rm
Rm
%
1 797
369
20.5
1 820
321
17.6
Strict cost management and supply chain optimisation in conjunction with
price increases led to improved GPADE levels. During the first quarter, various
refinery shutdowns led to constrained markets and impacted our selling
volumes significantly. With the debottlenecked import facility as well as a
new import supply agreement being available in the second quarter, the
supply situation has been changed considerably, with Afrox now being able to
flex for big variability in refinery supply.
Revenue has been adversely impacted by the LPG market price development
with underlying revenue increasing by 1.3% on a comparable basis. The
decline in volumes was attributable to the constrained market supply from
local refineries in the first quarter when Afrox’s import facility was not
available due to the debottlenecking process. During this period of market
short supply, Afrox focused on supplying its most economically strategic
customers and vital industries to avoid negative knock-on effects throughout
the country.
GPADE improved 15.1% with margins increasing from 17.6% to 20.5%. Better
supply chain efficiencies and increased focus on pricing have been the main
enablers of this significant improvement in getting Afrox LPG profitability back
to where it needs to be. During periods of supply constraint it was especially
positive that the business recovered the extra distribution cost of tanker
deliveries into the Western Cape via a surcharge demonstrating the increased
focus on margin management, while at the same time maintaining service
levels to key customers.
The final report from the Competition Commission is currently expected to be
published in March 2017. Afrox will continue to monitor developments and
evaluate the possible market impacts and ensure appropriate responses.
Financial results and dividend declaration for the year ended 31 December 2016
29
Commentary continued
Hard Goods
KPI
Revenue
GPADE1
Margin
Revenue
Down by 15.5%
R666 million
GPADE
Down by 14.7%
1
R232 million
Achievements
• Production outsourcing allowed costs to flex better with demand
• Improved production cost from workforce flexibility at production sites
• Cost savings from portfolio optimisation and product rationalisation
Key challenges
•Difficult trading environment with strong decline in production at key
customers and the mining, energy and fabrication sector
•Competitive environment with pressure on prices in combination with
lower volumes led to compressed margins for a variety of products
1
Gross profit after distribution expenses.
Unit
2016
2015
Rm
Rm
%
666
232
34.8
788
272
34.5
Total revenue declined by 15.5% compared to prior year as a result of lower
volumes in welding and gas equipment, which was strongly impacted by the
downturn in mining, iron and steel and manufacturing. Within the area of
Afrox gas equipment, business volumes have reduced by approximately 9%
year-on-year reflecting lower economic activity.
Around 5% of the overall sales decline reflects portfolio management, with
the business exiting some low-margin products and pieces of business.
To mitigate this, the business has been pursuing various initiatives for
alternative growth such as continued focus to increase exports to
overseas markets.
GPADE: The reported improvement in % margin is a result of higher efficiencies
in the value chain and portfolio rationalisation during the turnaround which
led to the discontinuation of low-margin products. The outsourcing of Afrox
gas equipment production facility resulted in lower fixed production cost and
allowing costs to flex with the lower volumes supporting margins. It also led
to lower inventory levels due to the simpler supply chain.
While the business saw steep declines in revenue in the first half of the year,
revenue stabilised in the second half due to increasing commodity prices and
the benefits this brings to some of the key customer sectors.
30
African Oxygen Limited
Emerging Africa
KPI
Revenue
GPADE
Margin
Revenue
Unchanged
R755 million
GPADE
Down by 1.6%
1
R306 million
Achievements
• Stable revenue despite difficult economic environment
• Cost savings from relocation of operational site in Mozambique
• Additional LPG storage facilities and more micro plants commissioned
Key challenges
•
Difficult trading environment as a result depressed commodity prices,
resulting in a slowdown in market growth
•Constrained LPG and CO2 supply from South Africa from refinery/production
plant shutdowns
•Local droughts, electricity shortages, inflationary pressure and devaluation
of local currencies
1
Gross profit after distribution expenses.
Unit
2016
2015
Rm
Rm
%
755
306
40.5
755
311
41.2
Overall revenue remained stable compared to 2015 despite portfolio
rationalisation such as the exit from DRC, and weaker economic conditions
due to the downturn in the mining sector driven by low commodity prices.
Supply constraints from South Africa for LPG and CO2 have also impacted topline growth. The revenue from Hard Goods and Industrial Gases, such as
welding products for mines, has deteriorated as a consequence of many
mining customers deferring any non-essential maintenance or upgrade
programmes. There were, however, various customer wins in consumer-led
markets for LPG and CO2 which contributed positively.
GPADE declined by 1.6% year-on-year with underlying pressure from cost
inflation and initial challenges to adjust pricing adequately. There was
increased competition from local suppliers in the LPG markets in some
geographies, which limited our ability to adjust prices in line with higher
distribution and import cost. The business continued to benefit from cost
reduction and operational efficiencies in most countries.
Both the revenue development and GPADE were also impacted negatively by
currency translation effects, with most countries seeing their currencies
weaken versus the ZAR.
Financial results and dividend declaration for the year ended 31 December 2016
31
Abridged audited consolidated statement of financial position
as at 31 December 2016
31 December
2016
Audited
31 December
2015
Audited
2 952
406
15
72
52
2 988
538
19
88
53
Non-current assets
3 497
3 686
Inventories
Trade and other receivables
Lease receivables
Derivative financial instruments
Receivables from fellow subsidiaries of holding company
Taxation receivable
Cash and cash equivalents
Assets held for sale
611
1 044
16
–
66
38
1 175
–
604
864
19
15
54
53
880
120
Current assets
2 950
2 609
Total assets
6 447
6 295
Equity holders of the parent company
Non-controlling interests
3 657
27
3 431
37
Total equity
3 684
3 468
Long-term borrowings
Other long-term financial liability
Deferred taxation liability
1 000
26
553
1 000
–
518
Non-current liabilities
1 579
1 518
Provisions
Trade, other payables and financial liabilities
Taxation payable
Derivative financial instruments
Bank overdrafts
16
1 109
26
11
22
73
1 186
22
–
28
Current liabilities
1 184
1 309
Total equity and liabilities
6 447
6 295
R’million
ASSETS
Property, plant and equipment
Retirement benefits assets
Deferred taxation asset
Lease receivables
Other non-current assets
EQUITY AND LIABILITIES
32
African Oxygen Limited
Note
1
2
Abridged audited consolidated income statement
for the year ended 31 December 2016
31 December
2016
Audited
R’million
Revenue
Operating expenses (excluding restructuring costs)
Earnings before interest, taxation, depreciation, amortisation and impairments (EBITDA)
Depreciation and amortisation
Impairment of tangible assets
Impairment of intangible assets
31 December
2015
Audited
5 537
(4 300)
5 473
(4 469)
1 237
(379)
(10)
–
1 004
(390)
(27)
–
Earnings before interest and taxation (EBIT) before restructuring costs
Restructuring costs
848
–
587
(79)
Earnings before interest and taxation (EBIT)
Net finance expense
Income from associate
848
14
2
508
(9)
1
864
(264)
500
(75)
Profit for the year
600
425
Attributable to:
Owners of the Company
Non-controlling interests
597
3
414
11
Profit for the year
600
425
193.3
134.2
Profit before taxation
Taxation
Earnings per share – cents
Basic and diluted earnings per ordinary share – cents
Financial results and dividend declaration for the year ended 31 December 2016
33
Abridged audited consolidated statement of comprehensive income
for the year ended 31 December 2016
R’million
Profit for the year
Other comprehensive income after taxation
31 December
2016
Audited
600
(106)
31 December
2015
Audited
425
49
Items that are or may be reclassified to profit or loss
(50)
21
Translation differences on foreign operations
Translation differences relating to non-controlling interests
Changes in fair value of cash flow hedges (net of taxation)
(43)
(4)
(4)
13
3
5
Items that will never be reclassified to profit or loss
(55)
28
Actuarial (losses)/gains on defined-benefit funds
Deferred taxation relating to actuarial losses/(gains)
(77)
22
39
(11)
Total comprehensive income for the year
494
474
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
495
(1)
460
14
495
474
34
African Oxygen Limited
Abridged audited consolidated statement of cash flows
for the year ended 31 December 2016
31 December
2016
Audited
31 December
2015
Audited
848
508
389
(67)
417
88
Operating cash flows before working capital adjustments
Working capital adjustments
1 170
(11)
1 013
82
Cash generated from operations before restructuring costs
Restructuring costs paid
1 159
(60)
1 095
(169)
Cash generated from operations
Net finance expenses
Taxation paid
Dividends received
1 099
(66)
(177)
1
926
(74)
(116)
1
Cash available from operating activities
Dividends paid to owners of the parent
Dividends to non-controlling interests
857
(275)
(9)
737
(56)
(5)
Net cash inflow from operating activities
Additions to property, plant and equipment and intangibles
Proceeds from disposal of property, plant and equipment and intangibles
Other investing activities
573
(389)
84
33
676
(377)
34
33
Net cash outflow from investing activities
Incentive share scheme shares purchased on behalf of employees
(272)
–
(310)
(11)
R’million
Earnings before interest and taxation (EBIT)
Adjustments for:
Depreciation, amortisation and impairments
Other non-cash movements
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
–
(11)
301
852
355
497
1 153
852
Financial results and dividend declaration for the year ended 31 December 2016
35
Abridged audited consolidated statement of changes in equity
for the year ended 31 December 2016
R’million
Balance at 1 January 2015
Total comprehensive income
Share
capital
and share
premium
552
–
Profit for the year
Other comprehensive income, net of taxation
–
–
Shares purchased on behalf of employees
Share-based payments,net of taxation
Dividends
–
–
–
Incentive
scheme
share and
share based
payment
reserves
FCTR and
hedging
reserves
Actuarial
gains/
(losses)
Retained
earnings
Noncontrolling
interests
Total
equity
(8)
–
(68)
18
289
28
2 254
414
28
14
3 047
474
–
–
–
18
–
28
414
–
11
3
425
49
–
–
–
–
–
–
–
–
(56)
–
–
(5)
(11)
19
(61)
(11)
19
–
Balance at 31 December 2015
552
–
(50)
317
2 612
37
3 468
Balance at 1 January 2016
Total comprehensive income
552
–
–
–
(50)
(47)
317
(55)
2 612
597
37
(1)
3 468
494
Profit for the year
Other comprehensive income, net of taxation
–
–
–
–
–
(47)
–
(55)
597
–
3
(4)
600
(106)
Share-based payments, net of taxation
Forfeited shares
Dividends
Transfer to retained earnings
–
–
–
–
–
–
–
(262)
–
11
(275)
257
–
–
(9)
–
6
–
(284)
–
Balance at 31 December 2016
36
African Oxygen Limited
552
6
(11)
–
5
–
–
–
–
–
(97)
–
2 945
27
3 684
Segmental report
for the year ended 31 December 2016
R’million
Revenue*
Atmospheric Gases
LPG
Hard Goods
Emerging Africa
Gross profit after distribution (GPADE) before restructuring costs
Atmospheric Gases
LPG
Hard Goods
Emerging Africa
Reconciliation of GPADE to EBIT
GPADE for business segments before restructuring costs
Other operating expenses
Impairments
Restructuring costs
Earnings before interest and taxation (EBIT)
31 December
2016
Audited
31 December
2015
Audited
5 537
5 473
2 319
1 797
666
755
2 110
1 820
788
755
1 775
1 585
868
369
232
306
681
321
272
311
1 775
(917)
(10)
–
1 585
(971)
(27)
(79)
848
508
* Revenue from external customers.
Financial results and dividend declaration for the year ended 31 December 2016
37
Statistics and ratios
for the year ended 31 December 2016
Average number of shares in issue during the period (‘000)
Shares in issue (‘000)
Dividends per share (cents)
Final
Interim
Ratios
EBITDA margin (%)
Interest cover on EBIT before restructuring costs (times)
Effective taxation rate (%)
Gearing (%)
Dividend cover on headline earnings (times)
38
African Oxygen Limited
31 December
2016
Audited
31 December
2015
Audited
308 568
308 568
94.0
308 568
308 568
69.0
56.0
38.0
51.0
18.0
22.3
–
30.5
(1.5)
2.0
18.3
66.6
15.0
3.6
2.0
Selected notes to the abridged audited consolidated financial statements
for the year ended 31 December 2016
31 December
2016
Audited
R’million
1.
2.
PROPERTY, PLANT AND EQUIPMENT
31 December
2015
Audited
Opening carrying value
Additions, net of transfers from assets under construction
Transfer to assets held-for-sale
Impairments
Disposals
Depreciation
Translation differences
2 988
379
(7)
(10)
(15)
(367)
(16)
3 166
379
(120)
(27)
(28)
(369)
(13)
Closing carrying value
2 952
2 988
ASSETS HELD FOR SALE
The sale of the Group’s land, situated in Cornubia, Durban, has been completed. The sale of unutilised properties
and assets at Gas Equipment Factory has also been completed as at 31 December 2016.
120
7
(127)
Opening net assets held for sale
Transfer to net assets held for sale
Disposals
Total net assets held-for-sale
3.
120
–
120
597
414
EARNINGS AND HEADLINE EARNINGS PER SHARE
Headline earnings per share are calculated on headline earnings of R585 million (2015: R429 million) and a weighted
average number of ordinary shares of 308 567 602 (2015: 308 567 602) in issue during the period.
Reconciliation between earnings and headline earnings
Profit for the period
Adjusted for the after-taxation effects of:
– Profit on disposal of property, plant and equipment
– Impairment of goodwill in subsidiaries
– Impairment of property, plant and equipment
Taxation
Headline earnings
Basic and diluted earnings per share – cents
Headline earnings per share – cents
(26)
–
10
(6)
–
27
581
4
435
(6)
585
429
193.3
189.4
134.2
139.2
Financial results and dividend declaration for the year ended 31 December 2016
39
Selected notes to the abridged audited consolidated financial statements continued
for the year ended 31 December 2016
R’million
4.
31 December
2016
Audited
31 December
2015
Audited
DIVIDENDS
Interim dividend number 177 paid on 12 October 2015: 18 cents per share
Final dividend number 178 paid on 19 April 2016: 51 cents per share
Interim dividend number 179 paid on 17 October 2016: 38 cents per share
Dividends declared per share – cents
Interim dividend number 179
Final dividend number 180
56
157
117
275
56
cents
cents
94.0
69.0
38.0
56.0
18.0
51.0
The local net dividend is 47.6 cents per share for shareholders liable to pay the dividend tax (2015: 43.35 cents) and 56 cents per share for shareholders exempt from
dividend tax (2015: 51 cents).
In terms of the dividend tax, the following additional information is disclosed:
– The dividend has been declared out of income reserves.
– The local dividend tax rate is 15%, subject to double tax agreement.
– Afrox currently has 308 567 602 ordinary shares in issue.
– Afrox’s income tax reference number is 9350042710.
5.
UPDATE ON KEY LITIGATION MATTERS
The Group and AMSA reached a settlement in 2016. The full proceeds of the settlement amounting to R165 million was received during the year. As at the date of this
report there is no outstanding litigation of a material nature against the Group. Afrox is presently a respondent in an investigation by the Competition Commission of
South Africa with respect to the LPG sector. Afrox is cooperating fully with the Commission’s investigation.
6.
SUBSEQUENT EVENTS
The directors are not aware of any material matter or circumstance arising between the end of the year and up to the date of this report, not otherwise dealt with in
this report. The proceeds of the disposal of certain properties amounting to R84 million were received subsequent to the year end, but before the date of this report.
40
African Oxygen Limited
Corporate information
African Oxygen Limited
(Incorporated in the Republic of South Africa)
Registration number: 1927/000089/06
ISIN: ZAE000067120 JSE code: AFX
NSX code: AOX
Transfer secretaries: Computershare Investor Services (Pty) Limited
Sponsor in South Africa: One Capital
Sponsor in Namibia: Namibia Equity Brokers (Pty) Limited
Directors: S Venter (Managing Director), DKT Devers** (Financial Director),
S Graham Johnston*** (Chairperson), M von Plotho*, Dr KDK Mokhele,
CF Wells**, RJN Gearing**, NVL Qangule, GJ Strauss
* German ** British *** American
Company Secretary: Cheryl Singh
Auditors: KPMG Inc.
Registered office
Afrox House, 23 Webber Street, Selby
Johannesburg 2001
PO Box 5404, Johannesburg 2000
Telephone +27 (11) 490 0400
GREYMATTER & FINCH # 10182