Pleasant Afrox trading update
EPS growth of 39 to 49%
JSE-LISTED African Oxygen Limited (Afrox) yesterday surprised the market with a trading update in which it said its earnings per share (EPS) were expected to grow by between 39 percent and 49 percent for the year to end December.
The group said the increase in EPS was largely due to improved margins from operational efficiencies and a reduction in fixed costs as well as a settled litigation case.
The share price rallied yesterday on the JSE following the release of the update and gained 7.24 percent to trade at R19.99 per share.
However, it closed at R19.45 at the end of the day. The expected earnings per share of between 186 cents per share and 199c per share would be better than the 134c per share reported in February 2016.
The group has benefited from the leadership of Schalk Venter, who was appointed in the first half of 2015. He was engaged in very aggressive restructuring efforts to cut costs during the past year and the results are starting to pay off.
In November last year Afrox settled litigation involving ArcelorMittal South Africa (Amsa). The two companies reached an agreement regarding the early termination of the supply contracts dispute which has resulted in a full and final settlement of all legal proceedings between the parties. Under the agreement, Amsa settled Afrox’s claims in a number of tranches to the total amount of R165 million.
The group also expects its headline earnings per share to improve on last year’s numbers. The headline earnings per share is expected to be between 31 percent and 41 percent higher to between 182c and 196c per share, up from 139c per share as compared to the previous corresponding period.
Wilhelm Hertzog, an analyst and portfolio manager at Regarding Capital Markets, said the trad ing update was better than what the market expected.
“The company has engaged in some concerted efforts to boost productivity and increase earnings, and has surprised the market in the extent of the recovery in profitability during the past year. This can also be seen in the share price reaction, which has been up strongly on the release of trading updates and financial results for the past six months,” said Hertzog.
The company will release the financial results on or around 22 February.
Afrox is expecting earnings per share to be up by between 39 percent and 49 percent for the year to end December. The improvement is attributed to improved margins from operational efficiencies and a reduction in fixed costs.