Afrimat Results affirm focus on infrastructure spend
JSE-listed Afrimat Limited delivered a reasonable performance for the year to February 2009 in light of the global economic downturn, supported by a good showing from two divisions - Readymix Concrete and Concrete Manufactured Products (“CMP”) - which helped boost revenue by 12,3% to R687,1 million. In line with strategy to intensify focus on government infrastructure projects for sustainable growth, the group successfully bolstered capacity and expanded further into the high-growth regions of Gauteng, Limpopo and Mpumalanga in which extensive public sector development spend is projected.
CEO Andries van Heerden says while the performance overall was satisfactory, the group definitely felt the effects of the international financial crisis. Slower trading was compounded by once-off extraordinary costs incurred during the year, which together reduced headline earnings. The once-off costs flowed from the set-up of new regional operations to target infrastructure spend and from the change in BEE shareholding. He points out that core headline earnings per share (which excludes the once-off costs) offers a more meaningful year-on-year comparison – core HEPS of 52,2 cents reflects a 28% decrease from the previous year. From an operational perspective he says the Mining & Aggregates division suffered a stagnating economy in the Western Cape and input costs increased, particularly diesel, affecting the entire group.
Van Heerden explains that the Mining & Aggregates division was unable to overcome the Western Cape’s collapsed residential sector and low spend on infrastructure while municipalities delayed projects. “However, the award of a number of large-scale projects in Gauteng, Limpopo and Mpumalanga and new processing plants there should translate to growth in this division going forward,” he adds.
In contrast the Readymix Concrete and CMP divisions benefitted from increased government spend on infrastructure and housing projects to drive higher volumes, which van Heerden says affirms the group’s strategy to target infrastructure development for growth. “Afrimat’s strict focus on infrastructure spend and the revision and enhancement of processes, systems and product mix to facilitate this, yielded positive results for these divisions.”
The Denver quarry, which serves the Port Elizabeth area, performed exceptionally well after the new plant was commissioned during the year. KwaZulu-Natal also delivered solid results for the group with Afrimat successfully concluding the acquisition of Sunshine Crushers, a quarry and readymix plant in Dundee, to strengthen its 45 year command in the area.
He emphasises that since year-end Afrimat has seen a significant improvement in its trading results and cash position. “In light of this upturn and strong prospects for future growth, Afrimat has declared a dividend for the year of 8 cents a share.”
Going forward he says new business development remains a key growth mechanism for the group. “Our dedicated business development team continually explores opportunities in existing markets with a particular emphasis on the provinces tipped for high infrastructure spend.” The team is tasked with identifying and fast-tracking organic and acquisitive opportunities.
Looking ahead he expects business activities for the year to February 2010 to show a marked uptick, encouraged by initial signs of improvement. Van Heerden concludes: “Government’s continued commitment to infrastructure projects is set to stimulate greater demand for Afrimat’s products, and the group’s geographic footprint ensures Afrimat is well placed to deliver. A number of large-scale public sector development projects are expected to gain momentum over the next year. In addition we will continue to reap the tangible benefits of our efficiency-improvement initiatives.”
The share closed yesterday at R1,99 putting the company on a PE of 3,43.
Issued by: Nicole Katz/ Michèle Mackey
(011) 325 5944 / 082 497 9827
On behalf of: Afrimat Limited
Andries van Heerden, CEO
Issue date: 14 May 2009