A much leaner Afrox saw the positive results of its 2015 restructuring in the year ended December 2016, while continuing to battle headwinds in the South African economy.
The group has pared down staff numbers through retrenchments and natural attrition since 2015 from about 3,000 employees to 2,000 now. This has freed up cash at the same time that operating efficiencies have been improved. Revenue only crept up 1% to R5.5bn in the year, but profit in the period shot up 41% to R600m from R425m previously. Headline earnings per share soared 36%.
"The turnaround has been completed and has delivered a step-change in profitability," MD Schalk Venter said on Thursday.
Afrox said it had increased earnings before interest, tax, depreciation and amortisation by 23% to R1.24bn, despite a challenging economic environment and past shortages of supplies of carbon dioxide used in drinks manufacture and liquefied petroleum gas (LPG).
The group ascribed this to the benefits of the restructuring and also a legacy legal settlement with ArcelorMittal SA that saw R165m injected into the group.
The continued focus on inventory management and optimisation of fixed assets helped provide cash on hand of R153m from a position of R148m in net borrowings in 2015.
Return on capital employed rose 24.6% from 16.7% in 2015.
Meanwhile, capital expenditure of R379m was constant year on year, ensuring sufficient production capacity to meet expected medium-term demand, Afrox said.
The rest of Africa excluding SA now accounted for 14% of revenues. Financial director Dorian Devers said cross-border African margins were higher, reflecting higher levels of risk on the rest of the continent.
Emerging Africa revenue remained flat at R755m in the year. Product volumes held up relatively well due to the group’s exposure to consumer-led markets. But gross profit after distribution expenses fell 1.6% to R306m in the period. The fall was prompted by supply chain shortages of imports of carbon dioxide and LPG from SA.
This resulted in alternative and more expensive sourcing in order to maintain supply levels. Afrox said. In addition, both revenue and profits were negatively affected by currency depreciation in most countries in Africa.
The group had also started small-scale exports of products into Latin American agro-processing markets.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.