Afrimat cements results with earnings up 25.4%

Afrimat, an open-pit mining company supplying industrial minerals and construction materials, continues to shoot out the lights in its results for the year ended February 2017.

Headline earnings per share rocketed 25.4% from 2016 as net average operating margins exceeded 12%. The group says the continuing improvement in results is due to its long-running diversification strategy, as well as cost reduction and efficiency initiatives.

“The business is performing extremely well,” Afrimat CEO Andries van Heerden said on Thursday. “We are highly, highly entrepreneurial.”

Cash generated from operations shot up 24.4% to R406m in the period. Revenue rose 13.1% to R2.2bn, with the company declaring a final dividend of 50c per share, up from 41c in 2016.

Afrimat has had average compound growth of 25% since 2008 and entire lifecycle growth of 12% since listing in 2006. Afrimat was once a construction-materials group supplying aggregates, ready-mix and other concrete products, Van Heerden said.

But now it was “really a mining company” with 37 mining licences. These included lime, metallurgical dolomite and metallurgical quartzite quarries. Most recently, it added the Diro iron-ore mine in the Northern Cape, which had an initial annual capacity of 1-million tonnes.

“I thought they were an excellent set of results, with the second half being as good as the first half,” said Vunani Securities analyst Anthony Clark. The 2017 results made up for the “pretty dour” 16% rise in financial 2016, which saw the stock slump to R18, he said. But it had made a solid recovery to about R27.50.

“Afrimat has a credible track record of showing [a more than] 20% rise in Heps year after year … that [had] paved the way for the ‘huge’ gains in [operating] margin seen in 2017; from 16.3% to 18.2%,” Clark said.

He said the expansion of the aggregates and industrial minerals margin from 20% to 24.1% in the year was “astonishing, showing what good, tight, costefficient operators Afrimat are”.

Neil Brown, co-head of Electus Fund Managers, said Afrimat was a well-managed company operating in tough industries. It was probable that “meaningful” acquisitions would dry up within SA’s borders, he said. “Afrimat is unproven outside of SA, so it is likely that [its] acquisition risk profile will increase.”