Diversification drives Afrimat’s continued growth
JSE open pit mining company, Afrimat, increased revenue by 42,1% and operating profit by 55,4% for the year to February 2014 (“the year”), reflecting the successful execution of its diversification strategy aimed at long-term sustainability. Realising five years of patient and prudent strategy roll-out, the group benefitted from the strong performance of its newer industrial minerals operations as well as an uptick in its traditional aggregates market. Afrimat further entrenched its industrial minerals foothold by upping its stake in Infrasors Holdings Limited (“Infrasors”) to 79,6%, which after year-end has escalated to a 90% interest in the company.
The results of Infrasors were included in Afrimat’s results for the full year for the first time.
Revenue of R1,9 billion was up from R1,3 billion last year. Operating profit grew to R230 million from R148 million at February 2013. Headline earnings increased 41,4%, translating into headline earnings per share of 109 cents compared to 76,9 cents in the previous year. Net cash from operating activities grew 43,6% to bolster the group’s strong cash position. Gearing increased to 15,5% in light of the debt burden of Infrasors assumed by the group on acquisition of a controlling stake in that company. Net asset value (“NAV”) per share was up to R5,79.
In light of the performance Afrimat again declared a dividend, with 39 cents a share significantly higher than 28 cents a share last year. CEO Andries van Heerden says maintaining consistent dividend payments for shareholders is a key objective of the group’s growth strategy.
Commenting on performance he says: “The group’s acquisitions in industrial minerals over the past three years (Glen Douglas, The Clinker Group and Infrasors) have contributed significantly to our robust results and ensured Afrimat’s resilience during the down cycle in our original markets, specifically aggregates.” In light of this success Afrimat has invested in upgrading the Glen Douglas dolomite mine for increased production output and in a new quarry that is already operational.
Van Heerden adds that the group’s turnaround strategy at Infrasors is definitely seeing positive results, albeit “that there is some way yet to go to capitalise on the full potential of Infrasors’ mines”. The group’s intention is to assume full control of Infrasors in due course.
He points out that it was not all doom and gloom in Afrimat’s traditional markets, with signs of a positive resurgence in aggregates. “Demand for aggregates is escalating and helping to drive improved volumes in our Mining and Aggregates segment.” He adds that the group is well positioned to meet increased demand with all processing plants fully operational. “In addition, Afrimat’s mobile plant means the group can take advantage of opportunities in an almost limitless geographical area across Africa, irrespective of the location of our fixed quarries.”
The Mining and Aggregates segment delivered 72% of group revenue at R1,5 billion, up from R914 million in the previous year. Concrete Based Products suffered restricted volumes and a drop in profit as a result of a strike in Gauteng.
Looking ahead van Heerden is positive that the group’s original aggregates business can return to its former levels of performance in time. “Bolstered by our flourishing industrial minerals business, this bodes well for Afrimat’s continued growth.” The focus in the year ahead remains on efficiency initiatives to expand volumes, reduce costs and develop employees’ skills, and a look-around in and beyond South Africa for growth opportunities.
He concludes: “We will continue to methodically roll out our proven business strategy, and maintain our efforts to anticipate market trends in order to address them early and ensure the group’s sustainability.”
Afrimat’s share closed yesterday at R16,05.
Issued by: Nicole Katz/Michèle Mackey
(011) 325 5944 / 082 497 9827
On behalf of: Afrimat Limited
Andries van Heerden, CEO
021 917 8840
Issue date: 15 May 2014