Afrimat, a leading open-pit mining company providing industrial minerals, bulk commodities and construction materials, today released interim results for the six months ended 31 August 2018. Revenue was up 28,6% to R1,5-billion, with operating profit at R202,7-million, a 4,3% improvement on the prior comparable period.
Afrimat CEO, Andries van Heerden, said that he felt pleased with the results, which were well supported by the group’s diversification strategy, particularly in respect of iron ore. “Afrimat will always focus on our competitive advantages, which include our geographic footprint, unique metallurgy, structural cost advantage and highly entrepreneurial culture.” He added, however, that there was no doubt that the political uncertainty and economic slowdown felt during the last quarter of the previous financial year continued during the interim period and impacted the construction materials businesses the most.
“Nevertheless, we choose not to linger on the negatives, but face the realities head on. We prefer looking for the opportunities that often arise in difficult markets and we believe that you should never waste a good crisis. The Bulk Commodities segment, which includes our Demaneng iron ore mine, is proof of this, contributing positively to these results after being bought two years ago at a low point in the commodity cycle. This is a gratifying outcome, demonstrating the importance of a well thought-through strategy.”
Headline earnings per share declined by 8,4% from 102,2 cents to 93,6 cents, with NAV per share of 943 cents. The Group declared an interim gross dividend of 19,0 cents per share (August 2017: 20,0 cents), in line with its dividend cover policy.
Operational review
Van Heerden commented that Afrimat’s operating units are strategically positioned to deliver excellent service to the Group’s customers, whilst acting as an efficient hedge against volatile local business conditions. “We have purposeful exposure to sectors with economic fundamentals that suit our business model to counter economic slowdown. Our product range is well diversified to include aggregates and concrete-based products as construction materials; limestone, dolomite and silica comprises the industrial minerals cluster. Iron ore is currently the only mineral in the bulk commodities cluster.”
The Bulk Commodities cluster’s Demaneng iron ore mine, contributed very positively to the Group results. The business completed the recommissioning of all processing equipment after the business was bought out of business rescue two years ago. It also expanded its rail load-out facility after successful collaboration with the logistical service provider. “Our ability to scale up or down quickly is a particular advantage in the iron ore business, meaning we can adapt quickly to any change in the market.”
Industrial Minerals businesses delivered solid results, although the Lyttleton Dolomite Mine was impact by the economic slowdown in the construction sector. “We are excited about our unique positioning in this segment” said van Heerden.
The Construction Materials cluster saw solid results in the coastal regions. The Mozambique business was in a ramp-up phase after receiving an order to supply construction materials to a large project. The KwaZulu-Natal and Gauteng businesses were impacted most by the economic slowdown, said van Heerden. “We are, however, optimistic that the construction sector will benefit from government’s economic stimulus initiatives. The R400 billion Infrastructure Fund should knock loose some activity and we are beginning to see small nuggets of growth starting to show in certain segments.”
Prospects
“The Group is well positioned to capitalise on its strategic initiatives, and we do foresee continued growth from an excellent asset base,” said van Heerden, adding that the Group expects further growth from the expansion of its unique product range and business improvement initiatives.
He stated that operational efficiency initiatives aimed at expanding volumes, reducing costs and developing the required skill levels across all employees, would remain a key focus in all operations.
Van Heerden said that the Group expects the current business climate to continue, and so would ‘stick to its guns’ in terms of ensuring that the diversification strategy is being implemented successfully. He said that Afrimat focuses on ensuring that the recent acquisitions are producing well, in addition to assessing further opportunities for acquisitions that fit the Group’s criteria.
He added: “New business development remains a key component of our strategy, and the dedicated business development team continues to successfully identify and pursue opportunities in existing markets, as well as in anticipated new high growth areas in southern Africa.”
Van Heerden concluded by stating his commitment to encouraging the sector and Government to work together to shape a collective vision for the future that everyone can work towards. “I am committed to pursuing this idea of a ‘Vision 2030’ as I believe strongly that the construction sector will return to robust levels, but we need to collectively find the opportunities to support growth, working together and driven by a common vision.”
