Afrimat more than doubles earnings
JSE black empowered construction materials supply group Afrimat, has more than doubled headline earnings from this time last year to R47,6 million for the six months to August 2007.
The interim period saw the group conclude two earnings-enhancing acquisitions - of Malans Quarries and Scottburgh Quarries - bolstering Afrimat’s long-standing presence in the Western and Eastern Cape and KwaZulu-Natal, where Mining & Aggregates demand is running high.
Revenue for the period amounted to R281,5 million, generating net profit of R46,4 million. Pro forma headline earnings per share of 41,6 cents (assuming the inclusion of all acquisitions for the full comparative six months and for the full six months of the period) increased by 23%.
Afrimat’s diverse product range includes Mining & Aggregates, ready mix concrete and concrete blocks and bricks. The group has a strong presence in the Eastern and Western Cape, Namibia, KwaZulu-Natal and Free State through a total of 22 quarries, 13 readymix plants, 8 precast factories and a large fleet of sophisticated mobile crushing plants.
CEO Andries van Heerden says Afrimat is recording excellent profitability with operating margins of 23,9%, one the highest in the sector. “The “Mining & Aggregates” division benefited from steadily increasing sales, with rising demand driving up prices and boosting profitability.” New quarries were brought onstream during the period to augment capacity. “We commissioned two quarries in the Western Cape, specifically in Kommetjie and Saldanha Bay, which will assist in accommodating unprecedented levels of demand.”
Van Heerden is optimistic about the prospects for the Western Cape after an exceptionally harsh winter season slowed construction during the past six months. In KwaZulu-Natal and the Free State he says cement shortages constrained growth in the first three months of the interim period, but have since been alleviated by Natal Portland Cement increasing capacity.
He continues that skills shortages at middle management level remain a challenge industry-wide, “although the group is beginning to see the benefit of training programmes instituted to address this”.
On listing Van Heerden set out the group’s expansion strategy, which came into play during the period with the two acquisitions. These have been included in the results for three (Malans Quarries) and two (Scottburgh Quarries) months respectively, since the respective dates of conclusion. Van Heerden is pleased with the bedding down of both acquisitions. “The Malans acquisition has boosted our presence in the Western and Eastern Cape adding strategically located quarries to our portfolio.” The new operations complement Afrimat’s existing product ranges particularly in sand and rubble crushing, with Malans holding 40% of the sand market prior to the acquisition. Van Heerden is confident that the inclusion of Malans will fuel future organic growth for the group.
In the second acquisition Afrimat purchased a sizeable quarry in Scottburgh and one in Pietermaritzburg as well as a concrete block and brick factory in KwaZulu-Natal. Although dormant when acquired, the Pietermaritzburg quarry has since been brought onstream using Afrimat’s mobile crushing plants and has commenced production. “The Scottburgh acquisition extended our penetration into urban areas where demand is strongest due to a high concentration of construction activity,” says Van Heerden.
He says the group will continue to pursue the pre-listing strategy of acquisitive growth. “The group’s exceptionally strong balance sheet will be used to fund future acquisitions that complement our existing operations and offer strong growth prospects.”
Looking ahead he is confident that the current operating margins can be maintained. Van Heerden expects robust market conditions and the inclusion of the two acquisitions for the full six months ahead to mitigate the impact of the month-long “builders’ holidays”, and help the group achieve growth in earnings for the full year to February 2009. The share closed yesterday at R10,85.
Issued by: Envisage Communications
Nicole Katz (011) 325 5944 / 083 287 2771
On behalf of: Afrimat Limited
Andries van Heerden, CEO 021 917 8840
Issue date: 30 October 2007