Afrimat ascribes slump to political events fallout
Aggregates and industrial minerals producer Afrimat says its annual results have been negatively affected by political events in SA, which “severely hurt” business confidence.
The uncertainty prevailed for the remainder of financial 2017, while an economic slowdown during the last quarter of the year had exacerbated the “operating climate”. This led to headline earnings per share (heps) falling 8% to 180.7c per share for the year ended February.
But Anthony Clark, an analyst at Vunani Securities, was upbeat about the company’s prospects on Thursday, despite a 17-year low in construction industry confidence in SA. He had recently upgraded Afrimat “back to a buy” with a target price of 3,600c.
“Results were in the middle of lowered heps guidance with extraneous factors principally in the third and fourth quarters,” Clark said.
This had negatively affected the core aggregates business and the group’s iron-ore mine.
“Both should reverse in the year ahead,” Clark said.
The prospects for Afrimat remained strong, he said.
“Acquisition in the past two years have not yet fully started to contribute to profits and earnings and hefty investment has been made.
“Afrimat management has a knack of buying great assets at low prices, rehabilitating them, then patiently reaping the rewards,” he said.
Afrimat’s net debt to equity ratio rose from 19.8% in the previous year to 37%, mainly due to strategic borrowings that included working capital.
The group said on Thursday that its product range was well diversified. It included construction materials such as concrete-based products, as well as industrial minerals such as limestone, dolomite and silica.
“The group added bulk commodities to an already diversified offering by entering the iron-ore industry,” Afrimat said.
Afrimat CEO Andries van Heerden had said earlier in 2018 that there had been “a sharp drop-off in business” in 2017. He said 2018 “will hopefully be much better than 2017 — a year I would like to forget”.