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Afrimat seeks growth opportunities as it posts record results

21st May 2020 BY: Irma Venter
Creamer Media Senior Deputy Editor

Openpit miner Afrimat is “well-positioned to grow” its business in the current environment, and should “things go south”, the company would be able to “survive for a long time”, says CEO Andries van Heerden. “We should be well hedged against the uncertainty of the future”.

Afrimat mines construction materials, industrial minerals and bulk commodities.

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Van Heerden on Thursday delivered the company’s financial results for the year ended February 29 from the company’s offices in Cape Town.

Record numbers saw an 11.4% increase in revenue compared with the previous year, to R3.3-billion, with operating profit up 27.5%, to R601-million, owed largely to an improvement across all three business segments, especially in bulk commodities.

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Net cash from operating activities increased by 64.9%, to R676.8-million, which resulted in a decrease of the net-debt-to-equity ratio from 23.8% in the prior year, to 8.2% in the current year.

Afrimat had “very good cash resources” and was “technically debt free”, noted Van Heerden. 

“We are in a good position to take advantage of any opportunities coming our way.”

Further diversification was also on the cards, he added.

Afrimat started out as a construction materials specialist, but from 2009 moved to add more products to its basket, and to expand into the whole of South Africa, as well as some neighbouring countries.

Some of the opportunities Afrimat would consider include further diversification and a number of business options in the iron-ore and construction materials market, said Van Heerden.

The company also recently took a 27% share in the Nkomati anthracite mine, in Mpumalanga.

“This is a good opportunity,” said Van Heerden.

Looking at Afrimat’s customer base and the influence the Covid-19-related lockdown had had on the South African economy, Van Heerden noted that the road building sector seemed to be lifting its head, with contractors slowly ramping up to return to work.

He added that the sale of construction materials was moving upwards, with “every day better than the previous day. We are ramping up operations according to market demand and in line with the regulations.[Alert] Level 3 should make a big difference.”

Government has indicated that South Africa may move from Alert Level 4 to Alert Level 3 by the end of May, which would allow more industries to return to work, while the industries currently at work would be able to increase capacity.

Van Heerden said the Afrimat board had decided not to declare a final dividend.

He said the decision supported the group’s general conservative nature and ensured the further preservation of cash owing to the uncertain nature of the current economic climate. 

The bulk commodities segment, consisting of the Demaneng iron-ore mine, delivered 31.4% of group revenue for the year ended February 29. Operating profit increased by 59.8%, to R321.7-million, as a result of an increase in volumes and favourable pricing across the year.

Afrimat’s industrial minerals business saw operating profit increase by 22.5%, to R95.6-million. The growth is attributable to these businesses entering new markets, increasing volumes, reducing costs and implementing efficiency improvements.

After a slowdown in the construction materials business in the prior year, it this year delivered a marginal recovery, with operating profit increasing by 1.2%, to R192.4-million.  

In Mozambique, Afrimat continues to supply construction materials in the ramp-up of major liquid natural gas projects in the north of the country.

  

EDITED BY: Creamer Media Reporter
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