Afrimat boosts access to urban construction sector with KZN acquisition
In a move to further entrench its strong foothold in metropolitan areas, black empowered building supplies group Afrimat Limited has purchased two quarries and a concrete block and brick factory in KwaZulu-Natal in its second acquisition since listing.
The strategically located quarries will boost Afrimat’s total quarry portfolio to 22 and block and brick factories to nine. Afrimat debuted on the JSE in November last year following the merger of its two key underlying operations - established industry leaders Lancaster Group and Prima Quarries.
The acquisition for an undisclosed sum encompasses a sizeable quarry in Scottburgh and a currently dormant quarry in Pietermaritzburg, which Afrimat intends to bring on stream in the near future. The quarries complement Afrimat’s five existing quarries in KwaZulu-Natal and Free State. CEO Andries van Heerden says the availability of quality quarries such as these is becoming increasingly scarce, making “the group particularly pleased with both quarries’ prospects supported by a more than 15 year life cycle remaining.” The acquisition also includes a fully operational concrete block plant in Scottburgh.
He says the acquisition is key to the group’s strategy of strengthening its position in metropolitan areas to drive growth. “Expanding into these high growth areas provides Afrimat with access to the burgeoning urban centres of Durban and Pietermaritzburg, currently a hotbed of construction activity which feeds our sector.” He adds that the acquisition boosts the group’s capacity to meet this increasing demand from the construction industry.
Although the Pietermaritzburg quarry is dormant the acquisition includes a mining licence. “We plan to start production at this quarry immediately through the use of mobile crushers and then adding fixed plant. Once fully operational, we believe it presents considerable scope for growth,” says Van Heerden.
The new block plant will augment the group’s existing operations in the region and enable Afrimat to escalate its supply of concrete blocks and bricks to the lucrative low-cost housing market south of Durban. Afrimat subsidiary Lancaster Precast is already a leading supplier of concrete blocks and bricks in its operating areas including KwaZulu-Natal, where generic reference to blocks and bricks as “Lancasts” reflects the group’s established presence. The group’s major contracts currently include the Lakeside development in Vryheid and projects in Nqutu, Ladysmith and Qwa-Qwa.
Van Heerden points out that the low-cost housing sector is mainly government funded which bodes well for its continued growth and in turn, for Afrimat’s prospects. “Due to government’s R32,4 billion budget allocation to low-cost housing Afrimat has identified this sector as a future growth focus for the group.
Van Heerden is confident the recent acquisition, although not expected to materially impact earnings in the current financial year, will prove earnings-enhancing in the long-term. “The quarries and concrete block plant provide clear geographical and operational synergies with our existing set-up in KwaZulu-Natal and have strengthened our future growth prospects.”
This transaction follows on the R125 million acquisition of Cape-based Malans Group and Denver Quarries in February, which boosted Prima Quarries’ 45 year presence in the Western Cape with a number of well located quarries and sand mines. The acquisition received Competition Commission approval at the end of May and is being implemented.
The group recently reported strong maiden results for the year to February 2007 with profit after tax of R67,6 million beating pre-listing forecasts by 6,3% year-on-year. The consolidated group achieved a healthy operating margin of 20%. Profit attributable to shareholders translated into headline earnings per share of 58,5 cents.
Afrimat’s share closed Friday at R10.
Issued by: Envisage Communications
Nicole Katz (011) 325 5944 / 083 287 2771 OR Michèle Mackey (011) 325 5944 / 082 497 9827
On behalf of: Afrimat Limited
Andries van Heerden, CEO 021 917 8840
Issue date: 16 July 2007