Afrimat’s continued strong interims
JSE open pit mining company, Afrimat, successfully exploited an uptick in the aggregates sector to deliver its promised stronger performance for the six months to August 2013 (“the period”). Key performance indicators are all significantly higher than at the same time last year, clearly reflecting the success of Afrimat’s ‘growth from diversification’ strategy. The results of Infrasors Holdings Limited (“Infrasors”), in which Afrimat acquired a controlling stake, were included in the results from 1 March 2013.
Revenue for the period grew 38,8% to R931,9 million from R671,3 million at August 2012. Headline earnings were up 41,2%, translating into headline earnings per share of 49,3 cents compared to 35 cents in the comparative period. Net cash from operating activities grew 37,1%, as a direct result of management’s stringent focus on cash generation and profitability.
Given the strength of the group’s performance, Afrimat declared an interim dividend of 11 cents a share for the period compared to the 8,0 cents a share interim dividend last year.
CEO Andries van Heerden says the group’s performance reflects the general improvement in the construction materials market, which is Afrimat’s traditional base. “He says that the increase in revenue is even more meaningful should the once-off mining costs incurred during the period be excluded. These were necessitated in the KwaZulu-Natal region to ensure long-term compliance with Department of Mineral Resources requirements. He adds: “It is very satisfying to see the success of our diversification strategy measurably proven – our bottom line easily withstood the increased costs we incurred in certain areas with the benefit of additional profits from other parts of the business.”
Afrimat has slightly tweaked its reporting segments to better reflect the day-to-day business. The group now reports in two segments, namely Mining & Aggregates comprising Industrial Minerals, Aggregates and Contracting Services, and Concrete Based Products comprising Concrete Products and Readymix. Van Heerden explains the contribution of the Readymix business to group results has become insignificant and that it is operationally part and parcel of Concrete Products, making standalone reporting for that operation immaterial.
Mining & Aggregates, which contributes the lion’s share of group revenue, generated high profitability off the back of increased volumes and the inclusion of Infrasors for the full period for the first time. Van Heerden expects performance to further improve in the six months ahead. “Operationally we are ideally positioned to supply market demand, with all processing plants on track to work at full capacity.” He points out that Afrimat’s flexible service delivery model, which enables the group to marshal mobile equipment and move wherever opportunities arise, is a key advantage in this respect.
Concrete Based Products’ performance was impacted by labour unrest as a strike at the Gauteng operation negatively impacted profits. In addition the division felt the effect of high cost increases in the sector.
Afrimat intent to secure a larger stake in Infrasors is progressing well, following the acquisition of a 50,7% stake in the company in March. During the period Afrimat raised its offer to Infrasors minority shareholders from 35 cents to 65cents a share, a premium to the 60 cents trading price at the time. This brought Afrimat’s stake in Infrasors to 59,78%. “Given that we acquired the Infrasors stake with intention of extracting value from its assets we can better achieve our aim if we completely control the business during a turnaround like this."
Looking ahead he says it is exciting to see the traditional business coming back on track. “It bodes well for Afrimat’s future that our aggregates business will return to its former levels of performance, augmented by our more recent footprint in industrial minerals,” he says. He concludes that Afrimat will continue on the path that has realised success in recent years, focussing on optimising its investments in the industrial minerals sector and with the dedicated business development team continually identifying opportunities in existing markets and cross-border.
Afrimat’s share closed yesterday at R12.63.
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: 31 October 2013