The recovery on track Page 1
Presentation Outline > Performance Summary > Performance Drivers ° External ° Internal > Afrox Results Analysed > Turnaround Update > Project Update & Outlook > Additional Content 2
Performance Summary
Business Highlights H1 2015 Top 10 topics 1 Safety performance impacted by vehicle incidents and accidents 2 Volumes generally more resilient than the market 3 Improved operating cash flow from focus on inventory and ROCE improvement 4 Strong EBITDA growth reflects early benefits from restructuring initiatives 5 Good LPG performance and margins recovering in a falling cost environment 6 Shortage of LPG negatively affecting revenue development potential Healthcare volume growth supported by state tender 7 8 All provisions required for restructuring taken 9 Interim dividend aligns with HEPS as dividend policy 10 New Executive team established under new Chairman, MD and CFO 4
SHEQ Performance Significant MIR reduction since 2009 MIR Trend Comments 35 An MIR is an incident with a major outcome MIRs Afrox 31 and consequences which: 30 28 > Represents a significant non-compliance 25 with Afrox's Safety, Security, Health, 25 Environment and Quality (SHEQ) policy 22 20 > Highlights the presence of a serious and unacceptable level of risk 15 > Creates a significant threat to Afrox's reputation 10 H1 8 2015 > Represents a serious risk of litigation 6 and regulatory action 5 5 0 2009 2010 2011 2012 2013 2014 2015 5
Performance Drivers
External Performance Drivers SA manufacturing and mining sector growth subdued > Commodity prices under pressure > Uncertain labour climate > Infrastructure projects at slower pace in sub-Saharan Africa > SA GDP growth forecasts revised downward > Electricity shortages hampering production and investments > Pockets of growth in certain sectors 7
Afrox Performance Drivers: Strategic Delivery The leading sub-Saharan Africa gases and welding products company with operations in 15 countries 2015-2016 Focus South Africa Rest of Africa > Focus on costs and >15% FTE reduction > Focus on growth areas and products > Drive efficiency improvements > Identify investment opportunities > Refined go-to-market approach > Further strengthen corporate governance > Resolve LPG security of supply > Reduce supply chain cost > Improve flexibility of Hard Goods supply > Ensure critical mass in each country chain 8
Afrox Results Analysed
Performance H1 2015 Highlights ZAR m H1 2014 H1 2015 yoy [%] Revenue 2,866 2,679 -6.5%* EBITDA 442 486 +10.0% EBITDA Margin 15.4% 18.1% +17.5% Non-recurring items 0 137 - Operating Cash flow 376 396 +5.3% EPS before non recurring items 52.8 66.9 +26.7% Headline EPS 49.5 37.4 -24.4% Reported EPS 52.8 35.0 -33.7% ROCE 12.8% 16.6% +29.2% > Revenue development negatively impacted by LPG pass through > Strong EBITDA growth reflecting early 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 > Improved operating cash flow development with focus on inventory and ROCE improvement 10 * Excl. market price change of LPG, total revenue unfavorable by -0.2%
Business Performance Despite overall lower revenues, increase in GPADE Atmospheric Gases ZAR m LPG Hard Goods Rest of Africa +5% -17% -6% -7% 946 1,045 457 465 899 425 437 Revenue 871 +0.8% H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 +15% +12% GPADE* -15% -4% 376 171 140 157 150 % Margin 153 327 119 36.4% 39.8% 14.6% 19.6% 30.6% 28.1% 33.8% 34.3% 28.1% 36.4% 39.8% 14.6% 19.6% 30.6% 33.8% 34.3% H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 11 Reported growth Comparable growth: excluding LPG pass through effect * GPADE is gross profit after distribution expenses
Atmospheric Gases Diversification supports revenue growth Sales by Market Segment Financials 946 ZAR m 2014 2015 Var % +4% 899 13 Paper 32 +7% 12 30 Sales 899 946 +5% +29% Construction 146 113 Automotive + Other +12% GPADE 327 376 +15% 128 115 Food & Beverages +5% % Margin 36.4 39.8 +340bp Petrochemical 128 134 +17% > Volumes resilient relative to market 134 Healthcare 157 -8% > Pricing in line with factor cost increase > First cost reductions from restructure 366 Steel & Mining 336 > Profit and Margin improvement Strategic Topics H1 2014 H1 2015 > Increase OPM from restructure > New CO 2 sources > Diversified, meaning well positioned against cyclical downturns of mining and steel sectors > Increase asset utilisation and reliability > CO 2 business offers good exposure to growing food and beverage > Go-to-market strategy sectors > Growth in new applications > South Africa steel sector output reduced 12.7% May 2015 vs. PY > Strong Healthcare growth reflects macro trend 12
LPG Good margin management and volume growth Financials South African Volumes (KT) Development Jan 13 – Jun 15 ZAR m 2014 2015 Var % Cylinder Bulk Sales 1045 871 -17% GPADE 153 171 +12% % Margin 14.6 19.6 +500bp > Revenue negatively impacted by pass through > Cold winter supports volumes Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 > Strong focus on margin management > Product availability remains crucial South Africa Margin per ton Development Jan 13 – Jun 15 > Strong distribution network Strategic Topics > Leading margin management > Supply of security Revenue per ton > Return on investment in cylinders Cost per ton > Go-to-market model relative to Industrial Gases Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 13
Hard Goods Provide good synergies for gases business Financials Comments Financials ZAR m 2014 2015 Var % > % GPADE reduction as costs not flexing down Sales 457 425 -7% > Market decline leading to increased price pressure GPADE 140 119 -15% Volumes > Mining industry currently in weak position % Margin 30.6 28.1 -250bp > Gas Equipment exports to Australia down linked to mining > Currently slow major infrastructure projects in South Africa Strategic Topics > Reduce inventory > SRD strong business in 2014 not expected to repeat in 2015 > Rationalise number of SKUs Go Forward > Options to right-size fixed costs to throughput > Hard Goods continue to provide integrated offer with gases 14
Rest of Africa Performance impacted by portfolio change and LPG shortages Financials Comments ZAR m 2014 2015 Var % Impact on Reported Numbers Sales 465 437 -6% > Lower LPG market prices impact sales > Angola exit R7m/R5m Sales/ GPADE impact GPADE 157 150 -5% > R9m GPADE impact from LPG shortage into Lesotho & Swaziland % Margin 33.8 34.3 +50bp > Zambia currency headwind Underlying Strategic Topics > Reduce supply chain costs and increase > Growing CO2 business customer supply security > Improvements in supply chain position > Infrastructure in place for growth > Good LPG margin management > Ensure critical mass in each country & appropriate governance in place Underlying 1 GPADE growth of 4% > 1. Underlying GPADE adjusted for R5m portfolio change impact and R9m LPG shortage into Swaziland & Lesotho 15
Selling, General & Admin Expenses (SG&A) Early effects of turnaround already evident Restructure SG&A H1 2014 versus H1 2015 ZAR m > Benchmarking highlighted opportunities to restructure to reduce -2% 530 520 headcount > FTE reductions already evident and consultation process underway > Consolidation of head-offices implemented > New procurement polices in place > Outsourced transactional processes to shared service centre H1 2014 H1 2015 16
Financial Performance: Key Indicators Financial position improving from solid base Cash Flow Financial KPIs 0.9 0.8 0.8 ZAR m H1 2014 H1 2015 ∆ in % 0.6 0.4 Net debt/ Operating cash flow 376 396 +5.3% EBITDA Investments (201) (125) -38% 16.6 15.6 14.8 15.1 12.8 Free cash flow 175 271 +55% ROCE Change in cash (31) 149 +180 2011 2014 LTM 2012 2013 and (financial debt) 30/06/2015 > Strong free cash flow through business performance and capital efficiency > Net debt falling relative to EBITDA > Going forward expect debt to increase due to restructuring charges, then drop as benefits delivered > Strong balance sheet with undrawn facilities > ROCE strong improvement due to restructure focused on performance and asset utilisation > 17
Turnaround Update Turnaround Update
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