AFRIMAT SEES START OF TURNAROUND
Afrimat’s performance in the year to February 2009 was impacted by slower trade, mainly as a result of the economic downturn, but exacerbated by a number of once-off costs. However, improvement is already evident in the months since year-end. A concerted exercise to focus group activities on public sector infrastructure development is beginning to yield positive results. In addition better operating margins have been achieved due to strict cost control and stability in materials pricing. Further, higher return on net assets and a satisfactory cash situation have strengthened the group’s financial position.

During the first quarter of the 2010 financial year Afrimat saw the return of normalised profit distribution across the group.

This was spurred by a significantly improved performance from the Mining & Aggregates division. The Readymix division is still marginally down overall, reflecting the very weak market conditions in the Western Cape. However performance in the division has been boosted by a strong showing in other parts of the country. Concrete Manufactured Products’ contribution in the first quarter was slightly lower year-on-year with volumes down on the prior year. This is expected to be alleviated going forward by a healthy project pipeline in certain parts of the country.

Although private construction spending continues to decline and the industry has been impacted by rising cement prices there are still attractive prospects in the public sector. Eskom has commenced construction of the Medupi and Kusile Power Stations and there are promising roads contracts countrywide. In addition a number of low-cost housing projects are underway in certain areas where Afrimat is active.

Interim results for the six months to August 2009 will be published in early November 2009.

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GEOGRAPHIC FOOTPRINT EXPANDING
Afrimat’s strategy to counter the cyclical nature of the industry by expanding into more stable growth nodes has gained momentum over the last 12 months. The group attempts to identify areas of high growth early on, and then establishes a footprint in the region either via acquisition or by organically building capacity. KwaZulu-Natal, Gauteng, Mpumalanga and Limpopo have been targeted over the past year.
KwaZulu-Natal

Afrimat resumed production at a dormant quarry in Pietermaritzburg in late 2008 to meet demand driven by government investment in rural KwaZulu-Natal. In addition, a quarry and a readymix operation in Dundee were acquired and state-of-the-art concrete manufacturing production capacity was added to existing operations in Vryheid, Ulundi and Park Rynie. These capacity enhancements have further boosted Afrimat’s firm foothold in the region.

Gauteng

Although Gauteng is a hyper-competitive market, prospects for well-positioned suppliers of good quality Mining & Aggregates are promising. Afrimat’s contracting team has achieved pleasing success with contract crushing and drilling and blasting operations in the region. Recently the group further augmented capacity with the acquisition of a second Mining & Aggregates operation in Gauteng, Blue Platinum Quarry. The quarry is situated 3km from Lanseria airport adjacent to the new Cradle City development. The acquisition complements Afrimat’s existing crusher situated near Randfontein.

Mpumalanga

In Mpumalanga construction of Kusile Power Station has sparked a massive drive for infrastructure investment in the area, with a number of roads being upgraded. Boosting capacity, Afrimat recently commissioned a new quarry, Spitskop, in close proximity to Kusile. This quarry is already working at full capacity with a second borrow pit recently opened.

Limpopo

Afrimat has commissioned a new quarry, Kuipersbult, in Limpopo to provide Mining & Aggregates for construction of the new Medupi Power Station. The group’s participation in this major project has been steadily increasing.

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AFRIMAT TO SCOOP INFRASTRUCTURE CONTRACTS

Afrimat has a wide geographical footprint across all major growth regions in South Africa. In addition to a presence in the Western and Eastern Cape, Free State, KwaZulu-Natal, Limpopo and Gauteng, the group has an extensive fleet of sophisticated mobile crushers which allows Afrimat to take advantage of infrastructure projects outside its traditional areas of operation.

The group is at present entrenched as the third largest supplier to the national Mining & Aggregates industry - supplying 5,5 million of the estimated total 54 million tons of Mining & Aggregates a year in South Africa.

 

Afrimat’s stone is used for roads, its bricks and blocks for low-cost housing projects, its readymix concrete for civil construction and its ballast stone for rail road construction and maintenance.

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AFRIMAT STRONG TO THE CORE

Afrimat views sound succession planning as an operational imperative. The group’s executive committee (“EXCO”) is made up of the group CEO, Financial Director and key management from the business units (see below). Supporting the EXCO, Afrimat has a strong team comprising engineers with extensive industry experience.

The EXCO comprises:

Andries van Heerden (43) – CEO
B.Eng (Mech) MBA (University of Stellenbosch) Government Certificate of Competence
Andries has held a number of senior board positions. He has extensive experience in strategic positioning, marketing and finance and was involved in the aggressive growth of APL Cartons. During 2001 he joined the Prima group as director and became Managing Director two years later. He left Prima in 2005 and formed a consortium which acquired the Lancaster group, of which he became CEO before merging the two groups to form Afrimat in 2006.

Hendrik Verreynne (52) – Financial Director
B.Compt Hons, CA(SA)

Prior to joining Afrimat Hendrik, a chartered accountant, was Financial Director for Oceana Brands Limited. Previously he was a senior executive in finance for Woolworths and Borden Foods and the Financial Director of Sea Harvest.

Peter Corbin (60) – Executive Director
B.Sc B.Eng (University of Stellenbosch)
Peter is a civil engineer with extensive experience in the sector, particularly in road construction. He has 24 years’ experience in the Mining & Aggregates industry. He joined Prima in 1985, where he was promoted to Managing Director in 2005.

Dr Jan van Heerden (57) - Managing Director: Afrimat Blocks and Bricks
B.Sc(Econ), Hons.B.Sc(Math), M.Sc(Stat), D.Comm(Econ)
Jan has extensive management experience and has been instrumental in Afrimat’s considerable growth in KwaZulu-Natal.

Billy Paton (51) - Managing Director: Afrimat Readymix
Diploma in Building Construction(UK), Advanced Concrete Technology Certificate (City & Guilds)
Billy has over 20 years’ experience in the concrete industry including as a lecturer on concrete technology at the Peninsula Technicon.

Carl Malan (51) - General Manager: New Business Development
B.Com
Carl was a controlling shareholder of Malans Quarries when it was acquired by Afrimat. He has more than 25 years’ experience in the Mining & Aggregates industry and has proved himself an exceptional entrepreneur. Carl is largely responsible for Afrimat’s success in penetrating the public sector infrastructure market.

Johan Bisschoff (41) - General Manager: Strategic Projects
B. Eng(Mech), MBA
Johan is a successful projects engineer. He is leading the drive to establish Afrimat’s ability to deliver projects successfully and economically anywhere on the sub-continent.

Anton Gerber (52) - General Manager: Human Resources
BA(Hons) (University of Stellenbosch), MBA (University of Stellenbosch), IRDP (University of Stellenbosch)
Anton has 26 years’ experience in the field of Human Resources. He is an exceptional strategic leader of the Human Resource function with good industrial relations expertise.

Charl Marais (39) – Regional Manager: Mining & Aggregates North
B.Com (Management Accounting) (University of Stellenbosch), MBA (Bond, Queensland, Australia)
Charl started at Malans Quarries during 2005 as Commercial Manager . He was appointed a Director and became a shareholder in 2006. He then held the position of Divisional Manager, New Business Development and Acquisitions until the end of 2008, when he was appointed Regional Manager Mining & Aggregates North.

Pieter de Wet (56) - Managing Director Lancaster Quarries
Piet is a qualified diesel mechanic with 28 years’ service with Lancaster Quarries. He rose through the ranks and was appointed as managing director of Lancaster Quarries in March 2006 following 10 years as operations director. He is well respected in the industry and is the Regional Chairman for the Mining & Aggregates and Sand Producers Association of South Africa. Piet is a distinguished expert in the Mining & Aggregates industry.

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This is the third edition of the Afrimat Investor Newsletter.

Should you have any suggestions of specific information you would like included in future editions, please revert to investorrelations@envisagesa.co.za.
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