New 5kg gas cylinders give Afrox a boost – but factory demand looks weak | Fin24
 
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New 5kg gas cylinders give Afrox a boost – but factory demand looks weak

Sep 16 2019 09:05

The introduction of 5kg gas cylinders, and strong demand from hospitals for its healthcare products, helped to counter the impact of a shrinking SA manufacturing sector on Afrox's revenue. 

South Africa's largest gas and welding company saw revenue rose by 3.3% to R3bn for the six months to end-June. Thanks in part to cost cutting, headline earnings per share rose by 7% to 111.3c.

The continued contraction in South Africa’s manufacturing sector led to a reduction in volumes in welding products, Afrox [JSE:AFX] said.

Revenue from its Liquefied Petroleum Gas (LPG) segment fell by 2.4% to R1.165bn, with its LPG bulk business volumes falling by 8.6% due to a reduction in demand. However, volumes from cylinder sales rose by 2.5% thanks to the introduction of 5kg cylinders for lower-income households. “This cylinder delivers an affordable alternative energy solution to a large section of the population.”

It also saw stronger sales in atmospheric gases, thanks in large part to demand from SA state and private hospitals. Last year, Afrox was awarded a R1 billion contract to supply state hospitals.

Afrox has started to manufacture a new valve for medical oxygen cylinders, which delivered additional gains on a rental business basis. An additional 6 500 units have been installed in the South African public hospitals over the past six months.

Capital expenditure increased by R40m to R180m due to investments into the new healthcare business.

“The low growth in the South African economy is likely to persist for the balance of 2019. However, given this environment, Afrox will continue to focus on specific growth opportunities, strict cost management and effective price cost recoveries,” the company said in a statement.

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