2015 Presentation Outline Performance Summary Performance Drivers - - PowerPoint PPT Presentation

2015

African Oxygen Limited Year-end Results Presentation

2

• Performance Summary
• Performance Drivers
• Afrox Financial Results Analysed
• Turnaround Update
• Key Project Update & Outlook
• Appendices

Presentation Outline

Performance Summary

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

• 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 5 10 15 20 25 30 35 2009 2010 2011 2012 2013 2014 2015 MIRs Afrox

Comments

Performance Drivers

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

Internal Performance Drivers

Well positioned for growth in Africa

8

10

COUNTRIES

GPADE CONTRIBUTION FROM REST OF AFRICA

20%

• Afrox Owned

Internal Performance Drivers

Significant asset density and strong market position

9

70

PLANTS PEOPLE

2336

Afrox Plant Assets

Afrox Financial Results Analysed

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

+3%

2015 2014 2,050 2,110

• 9%

2015 2014 746 681

36.4% 32.3%

GPADE2 % Margin Revenue1 Atmospheric Gases

• 14%

2015 2014 2,118 1,820

+11%

2015 2014 288 321

13.6% 17.6%

LPG

867

• 9%

2015 2014 788 2014

+11%

2015 244 272

28.1% 34.5%

Hard Goods

799

• 6%

2015 2014 755 300 2015

+4%

2014 311

37.5% 41.2%

Rest of Africa

Business Performance

Despite overall lower revenues, increase in GPADE

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• 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

• 1. Underlying financials adjusted for impact of lost major onsite account which impacted Q1 2014

Atmospheric Gases

Diversification supports revenue growth

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• 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

746 681

GPADE

2014 2015 2,110 2,050

• 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%

505 519 279 325 194 189 563 533 248 274 176 172

2,050 2,110

ZAR m ZAR m

Mining Paper 62 25 68 26

+4.1%1

• 5.9%1

13

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
• ffered 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%

2015 2014 2013

+4%

Cylinder Bulk

ZAR m

Product cost per ton Revenue per ton

Jan-13 Dec -15

Hard Goods

Impacted by slowdown in mining industry

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• 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

2015 2014

+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

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

2015 2014

+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

• 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

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1,141 970

• 15%

2015 2014

• 22%

Dec-15 Dec-13

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 2015 2014 2013 2012 2011

Net debt/ EBITDA ROCE

0.9 0.8 0.7 0.6 0.1

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Financial KPIs Cash 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

Turnaround Update

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
• perating 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

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

• f projects now being fully

defined Final costs R47mil lower than expected

> Restructure costs cover 1

° redundancy °

• utsourcing

° 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

Savings Costs

2014 2015 2016

421 343

144 277

• 1. Restructure includes impairment charges

2015

Key Project Update & Outlook

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

Key Project Update

cont.

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• 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

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

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Thank You

Statutory Income Statement (IAS34)

December 2015

• Appendix. I

Statement of Financial Position

December 2015

• Appendix. II

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

• utstanding shares

Earnings per Share (EPS)

Profit for the period attributable to Afrox shareholders Number of weighted average

• utstanding 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

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