Afrox cushioned by stable healthcare demand

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Afrox, the gases and welding products group, has reported lower volumes after sales were impacted by the Covid-19 lockdown.

Afrox has reported a fall in first-half revenue and earnings after the Covid-19 lockdown restricted sales and it paid more to source liquified petroleum gas (LPG) due to the shutdown of local refineries. However, the gases and welding products group says pressure was mitigated by a stable Healthcare business and the successful recovery of cost inflation, particularly in its Atmospheric Gases and Hard Goods businesses.

The company, which supplies gas to industrial and retail customers, said it achieved satisfactory revenue from its Medical Gases business despite non-critical operations being postponed at hospitals during the Covid-19 pandemic, leading to lower oxygen off-take. In 2018, it was awarded a five-year contract to deliver medical gases to government hospitals across all nine provinces. The new investment and roll-out of an inhouse designed and toll manufactured integrated valve for medical oxygen cylinders delivered additional gains on a rental business basis. It said about 21,000 units had been installed in the SA healthcare sector since it won the award.

Revenue fell 10% to R2.69 billion for the six months to end-June and earnings before interest and tax (EBIT) declined by 27% to R336 million as a result of lower sales volumes and the increased sourcing costs for LPG. This was mitigated by further efficiencies from restructuring activities and a strong focus on cost containment. Headline earnings per share (EPS) fell 31% to 76.5c while basic EPS decreased by 31% to 77.8c. It’s declared a final dividend of 38c, down 31% from last year.

Given the impact of the lockdown and subsequent reduced economic activities, Afrox will continue to focus on optimising revenue opportunities, effective price cost recoveries, fixed cost containment, cash preservation and liquidity to mitigate the lower level of economic activity,” Afrox said. “The Group’s cash balances of R1.17 billion places Afrox in a strong position to take advantage of future opportunities.”

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