Afrox on Monday soared on the JSE after the gas and welding products company reported an improvement in earnings for the six months to end June. Photo: Supplied

DURBAN – African Oxygen (Afrox) on Monday soared on the JSE after the gas and welding products company reported an improvement in earnings for the six months to end June benefited from a contract to supply all public hospitals and clinics in South Africa with medical gases.

The group said that its earnings before interest and taxes increased 4.8 percent to R457 million from R436m last year on the back of the multi-year contracts with the country’s public hospitals and further cost savings from restructuring activities.

The group said its earnings before interest and tax (Ebit) improved during the period from a 30.3 percent decline in the year to end December, mainly as a result of higher operational cost, additional plant breakdown cost of R56m, liquefied petroleum gas (LPG) stock devaluation, market price impact of R32m and increase in depreciation of R45m. 

Overall business improved during the period in review with a 3.3 percent increase in revenue to R3 billion from R2.90bn during the comparative period last year.

The group attributed the increase to improvement of volumes in the atmospheric gases segment and healthcare business as well as growth in cylinder volumes within its LPG segment and the successful recovery of cost inflation across all three segments.

Atmospheric gases revenue rose 9.9 percent.

It said the Ebit rose 18.9 percent from better revenue across most sectors. 

However, the group said the continued contraction in South Africa’s manufacturing sector led to a reduction in volumes in welding consumables within the hard goods segment. 

The segment reported a 1.2 percent fall  in revenue despite effective price management to recover increase in underlying cost from inflation. 

The group’s earnings before interest, taxes, depreciation and amortisation increased 6.3 percent to R659m, up from R620m while headline earnings per share (Heps) increased by 7 percent to 111.3 cents a share, up from 104c compared with last year. 

“Adjusted for IFRS 16, Heps would have been 112.8c or 8.5 percent up compared with last year. Diluted earnings per share increased by 7.2 percent to 111.3c,” the group said. 

The group declared a 5.7 percent increase in interim dividend to 55c a share.   

Looking ahead Afrox said the low growth in the South Africa is likely to persist for the balance of this year. 

“However, given this environment, Afrox will continue to focus on specific growth opportunities, strict cost management and effective price cost recoveries,” the group said.

Afrox shares closed 4.91 percent higher at R20.72.