Continued diversification drives Afrimat earnings growth in H1

JOHANNESBURG (miningweekly.com) – Empowered openpit mining group Afrimat, which on Thursday celebrated ten years of being a JSE-listed company, lifted its headline earnings a share by 25.3% and its revenue by 15% year-on-year for the six months ended August 31.

Revenue increased to R1.2-billion, profit to R109-million and cash generated from operations to R113.7-million.

Speaking to Mining Weekly Online, CEO Andries van Heerden said the increases were attributable to the company’s operational efficiency programme that has been running for the last two years.

“We are really starting to see the value of the programme. We have strong performances across the board in the mining and aggregates business. We also saw growth in activity in the construction space. All of that combined gave rise to our growth,” he said.

He added that the company’s performance was further supported by improved efficiencies, cost reduction and the disposal of marginal businesses.

In line with Afrimat’s strategy to diversify, the new greenfield projects that were initiated in Mpumalanga and Mozambique have started contributing positively. 

The group’s acquisition of the quarry and ancillary business of WG Wearne in Bethlehem became effective from November 1.

Afrimat has also concluded an agreement to buy 60% of Diro Manganese and Diro Iron Ore (DIRO), after these companies were placed into formal business rescue. The aggregate sum payable for the acquisition of DIRO is R276-million.

“The acquisition will complement and augment Afrimat’s product offering and further expand its footprint across South Africa,” he said.

All processing plants are fully operational and strategically positioned to deliver a service to the group’s customers. New initiatives aimed at restoring profitability in the Infrasors business, after the closure of Highveld Steel in the prior year, have proven to be very successful.

Post the reporting period, Afrimat received an offer from African Rainbow Capital (ARC) to buy 26.3-million shares in Afrimat from Afrimat Empowerment Investments (AEI).

The shares comprise about 18.36% of the share capital in Afrimat and subject to various conditions precedent, including the approval of participants of the Afrimat Black Economic Empowerment Trust. ARC has agreed to be locked in for a period of at least four years on successful conclusion of the purchase of the Afrimat AEI shares.

Van Heerden noted that new business development remains a key component of the group’s growth strategy.

“Afrimat expects the current business climate to continue with the group’s growth driven by the successful execution of its proven strategy, recent acquisitions and a wider product offering to the market.”

CONSTRUCTION MARKET
In terms of the construction sector, Van Heerden said the maintenance of roads was at a record high across the country, as was investment in water, sanitation and low-cost housing infrastructure, primarily driven by government.

“People say the economy is down and people are negative, but we see a strong demand for product in the building space, which is strange, because the cement industry is under enormous pressure,” he said.

Van Heerden explained that the cement industry was under pressure as a result of the oversupply created by the introduction of two new entrants into the cement market recently.