Publications
Partners
Johannesburg - Chemicals group African Oxygen [JSE:AFX] plans an aggressive growth strategy in Sub-Saharan Africa in the coming months in an effort to offset sluggish earnings in the local market.
"There's a lot of opportunities there for us, especially in the Angolan oil market," Afrox managing director Tjaart Kruger told Fin24.com on Thursday following the release of lack-lustre interim numbers.
Currently around a third of the group's earnings, which fell by 13% to R433m in the six months to end-June 2010, are generated outside of South Africa.
The company manufactures industrial, scientific, medical and hospitality gases as well as welding products.
Afrox already has a strong presence on the continent and dominates as a chemicals supplier in 11 Sub-Saharan markets.
Afrox also plans to increase supply of carbon dioxide to carbonated drinks manufacturers in Africa.
Further opportunities exist for expansion in the Democratic Republic of Congo as well as in new markets in West Africa. Afrox currently has operations only in Ghana and Nigeria in that region.
Back home, however, Afrox is struggling. Its interim revenue fell 3% to R2.3bn and there are no signs of improvement in trading conditions, the group said.
"It's been very difficult and the only sign of recovery has been in the automotive sector," said Kruger.
Net interim profit fell to R125m from R127m last year. The group's earnings margin fell 1.8% to 15.3%.
Afrox has blamed factors outside of its control for the tepid performance - power outages at its plants and the transport workers' strike earlier this year that interfered with production.
The increase in electricity prices, following the implementation of Eskom's tariffs in June this year, also had a negative effect on the bottom line.
Kruger said that these evens are unlikely to be repeated in the second half of the year, which may bring a bit of relief to the bottom line.
The outlook for the second half still remains grim, however, and the company's results statement warned shareholders that management is "cautious".
"We think the general economy will still be sluggish for the rest of the year," said Kruger.
Further worrying factors are the sustained rand strength, which has eroded the competitiveness of the company's welding products.
Exchange rate strength is also hitting Afrox' clients and is resulting in lower demand, said Kruger.
The group declared an interim dividend of 19c/share - unchanged from last year and in line with the group's dividend policy.
- Fin24.com
