Afrox expects its earnings before interest, taxes, depreciation and amortisation (Ebitda) before any restructuring costs for the year ended December 31 to be between R792-million and R836-million, 5% to 10% less than the previous year’s R880-million.

This decrease, Afrox explained on Thursday, was owing to the ongoing impact of inflation and reduced volumes.

In November the company announced that it would embark on a “significant” restructure to achieve a step-change in profitability against a backdrop of soft demand for its products resulting from the prevailing economic conditions and intense competition.

The primary objective of the restructure was to address the group’s fixed cost base to significantly improve its Ebitda margin in the medium term.

Afrox believed that these conditions were likely to continue into the medium term and that the restructure was a necessary step to ensure the sustainability of the company in the longer term.  

The group’s consolidated revenue for the year under review was expected to be in line with the revenue earned in the previous financial year of R5.82-million, while earnings a share were expected to be between 68% and 78% lower than that of the prior year, at between 22c and 32c apiece.

Headline earnings per share (HEPS) were expected to decline by up to 67%, at between 31.5c and 40.9c apiece, after taking into account the provision made and impairment costs related to the restructure.

“The main contributor to the reduction in headline earnings is a R165-million provision for restructuring costs together with a R20-million write-down of inventory owing to the restructuring.

“Added back in the calculation of HEPS is a R52-million impairment of assets, resulting from the planned restructuring,” Afrox outlined.

The company said in a trading update that it planned to engage a leading global business advisory firm with “significant” international experience in corporate restructuring and performance transformation to ensure that the restructuring process was brought to a successful conclusion by the end of 2015.  

Afrox would release its full year results on February 26.