- Gained new business with improved support from distributors
- Gas & Gear customer service growth
- Improved product alignment for market needs
- Supply constraints in the first half of the year
- Reduced government investment in independent power producer contracts
- Aggressive competition practices developing in industry
Key performance indicators
Total revenue decreased by 1% despite improved pricing and business retention with underlying growth in our premium product ranges. Volumes in welding and gas equipment are still negatively impacted by the continued downturn in mining, iron and steel, and manufacturing. Our gas equipment business volumes reduced further, reflecting lower economic activity. Increased competition was experienced and is expected to intensify as the number of infrastructure projects in the country continues to reduce.
An example is government’s reluctance to sign new independent power producer contracts, some of which were delayed in 2015 to be reconsidered in 2018. This has caused a significant slowdown in the renewable energy sector. One of the country’s two wind tower manufacturers was forced to close as a result and there is visible curtailing of solar project development.
Despite these economic pressures, the Hard Goods segment gained new businesses,resulting in specialised resources to better position the Company to obtain key contracts related to welding.
Gas equipment factory (GEF) impact
The disposal of the GEF was finalised in 2017. The Company experienced some sales disruptions as our new manufacturer experienced some challenges which led to delays in product delivery in the first half of the year. There was a marked improvement in the latter part of the year. Low demand in the manufacturing sector exacerbated the challenges faced in attempting to improve volumes.
A third tier Arcmate range of gas equipment was developed during 2017 and will be launched to the wholesale market in early 2018. These products complement the Arcmate equipment and Fillermetals offers and align with the Company’s growth focus in the light industries segment of the market.
To support strategic sales, equipment rental and safety solutions were launched in 2017. Equipment rental offers welding machines to contractors who have short-term contracts and need additional equipment for short periods of time. The safety solutions programme is aimed mainly at the mining sector where Afrox audits arc and gas equipment for conformity to standards. As an added service, Hard Goods personnel train the operators and engineers in the safe use of such equipment.
Branding and signage support is offered to partners and distributors to ensure the prominence of the Afrox brand and our sales offering ensures that our brand remains synonymous with effective customer service. The 10% year-on-year sales growth of Afrox Gas & Gear facilities is related to the focused retail training rolled out to all Gas & Gear personnel during the first half of 2017. Most Gas & Gear facilities received new branding and the latest point-of-sale material available to guarantee effective merchandising.
Future focus areas
- Afrox will continue to manage the Hard Goods inventory closely and leverage products as an integrated offer with our gases team to provide customers with a complete welding solution.
- The Group has identified growth opportunities in the light industry market and continues to develop tailored offers to capitalise on these. We will continue the development of the third tier range of equipment and fillers for the wholesale market.
- Afrox will pursue strategic alliances with global original equipment manufacturers. We will further focus on Emerging Africa for potential growth opportunities in Hard Goods, specifically in the oil and gas sector. This includes improving certifications for Filler materials, primarily for key customers in the petrochemical sector.