Steady recovery after a disastrous decade for Afrox
Trading on a modest 10.4 p:e, Afrox is a share to consider as a core long-term portfolio holding
Just three years ago things were looking bleak for Afrox, with headline earnings falling 87% between 2005 and 2014. The industrial, medical and consumer gases group has since put the disastrous decade firmly behind it. Afrox rebounded in its year to December 2015, lifting headline EPS (HEPS) by 285%. It followed this up last year with a 36% rise. The recovery restored HEPS to above pre-slump levels. Afrox’s disastrous decade was brought about by years of failure to address a seriously inflated cost structure. The turnaround was entrusted to Schalk Venter, who came aboard as MD in May 2015. He oversaw an aggressive cost-cutting exercise that included plant closures and job cuts. It enabled Afrox to achieve a reduction in annual costs of R450m — R144m in 2015 and a further R306m in 2016.
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