4. 2015 Highlights
Top 10 Topics
Major Incidents (MIR) dropped by 70% between 2013-2015, compared to 2010-2012
EBITDA of R1,004m up 23%; margin improvement of 430bps
Restructure finalised; added efficiencies of R144m with implementation cost R47m lower
LPG volumes and margins improved despite worst year on record for refinery LPG supply
Robust Price Cost Recovery (PCR) in 2015. With increasing inflation and core market decline, PCR will
be a crucial performance challenge; stringent PCR management will continue to be a focus
Hard Goods strategy successfully executed including the outsourcing of gas equipment supply chain
Rest of Africa GPADE contribution increased to R311m, 20% of Afrox total
Very strong Group ROCE @ 16.7%; up 560bps with focus on profit growth and capital efficiency
Dividend declared in line with Afrox policy of 50% of HEPS, representing highest payment since 2007
eCommerce platforms attracted 256,000 self-service transactions resulting in 20,000 man-hours saved
1
2
3
4
5
6
7
8
4
9
10
5. MIRs1 dropped by 70% between 2013-2015
compared to the period 2010-2012
Lost Time Injury (LTI) increased from
seven in 2014 to nine in 2015
Truck Severity level 1 and 2 increased from
zero in 2014 to six in 2015
1. 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
SHEQ Performance
Significant MIR reduction since 2009
5
MIR Trend
31
25
28
22
8
6
8
0
5
10
15
20
25
30
35
2009 2010 2011 2012 2013 2014 2015
MIRs Afrox
Comments
7. Progress Against Strategic Topics
By business segments
Atmospheric
Gases
Increase OPM from restructure
New CO2 sources
Increase asset utilisation and reliability
Go-to-market strategy
Growth in new applications
Price 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
Rest of
Africa
Reduce supply chain costs and increase customer supply security
Infrastructure in place for growth
Ensure critical mass in each country and appropriate governance
in place
Hard Goods Reduce inventory
Rationalise number of SKUs
Options to rightsize fixed costs to throughput
Not started
Work in Progress
Complete
7
8. Internal Performance Drivers
Well positioned for growth in Africa
8
10COUNTRIES
GPADE CONTRIBUTION
FROM REST OF AFRICA
20%
• Afrox Owned
11. Performance 31 December 2015
Highlights
11
ZAR m 2014 2015 yoy [%]
Revenue 5,834 5,473 -6.2%1
EBITDA 818 1,004 +22.7%
EBITDA Margin 14.0% 18.3% +430bps
Non-recurring items 185 79 -57.3%
Operating Cash flow 623 676 +8.5%
Headline EPS (cents) 36.2 139.2 +284.5%
Reported EPS (cents) 26.8 134.2 +400.7%
ROCE 11.1% 16.7% +560bps
1. Excl. market price change of LPG, total revenue favorable by +0.9%
Revenue development negatively impacted by LPG pass through of about R413m
Strong EBITDA growth reflecting benefits from restructuring initiatives
Positive EBITDA margin development from restructuring and also lower LPG pass through
effects
Non-recurring costs reflect current restructuring and impairment charges which are lower
than expected
Strong cash flow with focus on inventory and ROCE improvement
12. +3%
20152014
2,050 2,110
-9%
20152014
746
681
36.4% 32.3%
GPADE2
% Margin
Revenue1
Atmospheric Gases
-14%
20152014
2,118
1,820
+11%
20152014
288
321
13.6% 17.6%
LPG
867
-9%
20152014
788
2014
+11%
2015
244
272
28.1% 34.5%
Hard Goods
799
-6%
20152014
755
300
2015
+4%
2014
311
37.5% 41.2%
Rest of Africa
Business Performance
Despite overall lower revenues, increase in GPADE
12
1. Numbers shown on an adjusted basis with segments adjusted to align with how businesses are managed, & allocation of costs between businesses
have been updated to better reflect the split of operational costs. 2014 has been adjusted to be on a like for like basis with 2015.
2. GPADE is gross profit after distribution expenses
ZAR m
13. 1. Underlying financials adjusted for impact of lost major onsite account which impacted Q1 2014
Atmospheric Gases
Diversification supports revenue growth
13
Diversification across sectors supports sales
Steel sector continues to decline
CO2 business offers good exposure to growing food and
beverage sector, only constraint is regarding supply
sources
Mining industry under pressure with 20% portfolio
reduction
Strong Healthcare growth reflects macro trend
Lower onsite volumes with fixed costs of large plants
not flexing down in the short-term. This includes
impact of lost Evraz account
Increase in R&M due to statutory testing
requirements
Price increases aligned to cost inflation
Benefits of turnaround seen in lower distribution
costs
746 681GPADE
2014 2015
2,1102,050
-8.7%
+2.9%Sales
Financials
+10.5%
Sales by Market Sector
+2.3%
-5.3%
-2.6%
+9.7%
+2.8%
Healthcare
Automotive + Other
Construction
Steel Industry
2014
Petrochemical
Food & Beverages
2015
+4.0%
+16.5%
505 519
279 325
194
189
563 533
248 274
176172
2,050 2,110
ZAR m ZAR m
Mining
Paper
62
25
68
26
+4.1%1
-5.9%1
13
14. 288 321
LPG
Good margin management and volume growth
14
Revenue impacted negatively by pass through effects
Volume strong due to relatively strong value proposition
offered by LPG
Strong focus on margin management and distribution
efficiency
Product availability an issue with overall market
constrained
Volume (KT) Development 2013-15
2014
2,118
1,820
GPADE
2015
+10.8%
-14.1%
Sales
13.6% 17.6%
Financials
Margin per ton development Jan-13 to Dec-15
-3%
201520142013
+4% Cylinder
Bulk
ZAR m
Product cost per ton
Revenue per ton
Jan-13 Dec -15
15. Hard Goods
Impacted by slowdown in mining industry
15
Volumes impacted by declining markets
Gas equipment factory closed making cost base more
agile
Restructuring as well as cost focus ahead of factory
closure supported increased margin %
Improved focus on inventory management reduced
TWC
Financials impacted by significant inventory provision
taken in 2014
Underlying performance reflects market conditions and
successful measures taken to flex down cost based
244 272
867
788
GPADE
20152014
+11.5%
-9.2%
Sales
28.1% 34.5%
Financials
1. Underlying numbers adjusted for R40m of one-time stock provisions taken in 2014
Underlying Performance
-4.2%1
ZAR m
16. 300 311
799
755
Financials impacted by Zambian currency devaluation,
LPG pass through effects and exit from Angola
Robust underlying performance considering market
conditions and supply constraints
Rest of Africa
Performance impacted by portfolio change and LPG shortages
GPADE
Sales
20152014
+3.7%
-5.5%
37.5% 41.2%
Financials
+6.8%1
+11.9%1
Underlying Performance
1. Underlying financials reflecting adjustments for Angola exit, LPG pass through effects and currency translation effects. GPADE is
gross profit after distribution expenses
Seeing volume growth despite economic conditions
Growth has been constrained by both LPG and CO2
supply shortages
Strong focus on LPG margin management
Zambia volumes impacted by 60% fall in copper
pricing
Strong management focus with investments to
improve supply security and reduce cost
ZAR m
16
17. FTE reductions in line with turnaround plan
Consolidation of head office implemented
New procurement polices in place
Outsourced transactional processes to shared service centre
2014 Versus 2015
Restructure
Other Operating Expenses
Effects of turnaround already clear
FTE Development
17
1,141
970
-15%
20152014
-22%
Dec-15Dec-13
18. Financial Performance: Key Indicators
Financial position improving from solid base
ZAR m 2014 2015 ∆ in %
Operating cash flow 623 676 +8.5%
Investments (480) (321) -33.1%
Free cash flow 143 355 +148.3%
Change at the end of the
period
497 852 +71.4%
8.3 10.9 12.2 11.1
16.7
20152014201320122011
Net debt/
EBITDA
ROCE
0.9 0.8
0.7 0.6
0.1
18
Financial KPIsCash Flow
Strong free cash flow through business performance and capital efficiency
Net debt continues to fall relative to EBITDA
Strong balance sheet with undrawn facilities
ROCE strong improvement due to restructure focused on performance and asset utilisation
20. Get Healthy
Introduce leaner organisation
Rightsize operations
Better utilise assets
Outsource non-core operations
More effective procurement
processes
Best commercial practice (BCP)
pricing composition
New customer centric
operating model
Increase effectiveness &
efficiency of traditional
channels
Introduction of eCommerce &
EDI
Portfolio management
BCP price cost recovery
Grow Rest of Africa
Grow LPG
Grow Healthcare
Grow Special Gases
Turnaround Plan
Enhance channels and business portfolio
Get Strong Get Business
20
Completed In Progress
1 2 3
21. Restructure Costs and Benefits
Higher benefits for lower than expected costs
21
Restructure1 Costs & Savings
> Costs posted are final for ‘Get
Healthy’ phase of turnaround
> Increase from 2014 reflective
of projects now being fully
defined
Final costs R47mil lower than
expected
> Restructure costs cover1
° redundancy
° outsourcing
° closure of operations
° SKU reduction
° consultant support
> Benefits realised with
headcount falling since
December 2014
> All initiatives implemented by
year-end 2015
> Full impact expected by year-
end 2016
> 10-month payback on
investment
Costs Benefits
ZAR m
237
106
SavingsCosts
2014 2015 2016
421
343
144
277
1. Restructure includes impairment charges
2015
23. Key Project Update
23
1. Port Elizabeth ASU
> Successfully commissioned in April 2015, continuous production since June 2015
> Project delivered on time and on budget
3. Sale of Cornubia Land: 103 000m2
> Portion 79 was sold for R30m; 78 was sold for R24m
> Disposal of remaining portion 77 progressing
2. New Durban Filling Plant, Riverhorse Valley
> Maydon Wharf relocation to Riverhorse Valley in Q4 of 2015, with temporary filling
equipment utilised. New filling plant and equipment to be installed in 2016
> Project within budget, completion date of Q2 2016
24. Key Project Update
cont.
24
5. eCommerce Platform Update
> 17% of all delivered orders via eCommerce platforms
> 11,506 legal entities registered for eCommerce in 2015
> 256,000 self-service transactions resulted in 20,000 man-hours saved
4. LPG Imports and Storage
> Partnership with Petredec and Bidvest Tank Terminals
> Improved security of LPG supply
> Ability to grow LPG volume in SA and Rest of Africa
6. Gas Equipment Factory Disposal
> Factory closed and assets sold to Cavagna, a leading global gas equipment company
> Aligned to rationalisation of manufacturing footprint and reduced under-recoveries
> Afrox will procure from Cavagna; no change in product quality and standards
25. Outlook
Must ensure full value of turnaround reflected in 2016 financials
Complete rollout of new go-to-market model
Supply chain and plant optimisation
Focus on Special Gases, CO2, Healthcare, LPG, Rest of Africa growth areas
Target ROCE of 20%+ in medium-term
25
29. Definition of Key Financial Figures
GPADE
Gross Profit after Distribution
Expenses
Return on Capital Employed (ROCE)
EBIT
before non-recurring items
Equity (incl. non-controlling interests)
+ financial debt
+ liabilities from finance leases
- cash, cash equivalents and securities
- receivables from finance leases
Average Capital Employed
Headline Earnings
per Share (HEPS)
before non-recurring items
Profit for the period
before non-trading items
attributable to Afrox
shareholders
Number of
weighted average
outstanding shares
Earnings per Share (EPS)
Profit for the period
attributable to Afrox
shareholders
Number of
weighted average
outstanding shares
SG&A
Selling and marketing & general
administration costs
EBITDA
EBIT before non-recurring items
adjusted for amortisation of
intangible assets and depreciation of
tangible assets
Appendix. III
30. Investor Calendar 2016
AGM 26 May 2016
Interim Results Released 08 September 2016
Interim Investor and Analyst Presentation 09 September 2016
Contact
Phone: +27 11 490 0400
Email: investor.relations@afrox.linde.com
Website: www.afrox.co.za
Appendix. IV
