Afrimat’s diversification has paid off and continues to support it in tough times
AFRIMAT’S diversification strategy continued to support it through arguably one of the toughest years in the construction and materials industry.
Revenue increased by 24.1 percent to R3 billion in the year to September 28, 2018. Headline earnings per share grew 29.6 percent to 234.1 cents from 180.7c, the group said in a statement yesterday. A final dividend of 62c per share (2018: 42c) was declared.
Group chief executive Andries van Heerden said he was pleased with the overall performance. Afrimat’s entry into bulk commodities two years ago contributed handsomely to the earnings growth. Afrimat maintained a compound average growth rate of almost 20 percent a year for the last decade.
Healthy international iron ore prices turned the recently acquired Demaneng iron ore mine into a star performer, he said.
Van Heerden said the industrial minerals segment performance was strong in the second half of the year, although a slow first half resulted in the full-year performance to be marginally weaker than the previous year.
The group expects the current business climate to continue, with future growth to be driven by continuing with its strategy, recent acquisitions and a wider product offering.
Afrifocus Securities analyst Tinashe Kambadza said Afrimat’s diversification had paid off and management had shown their knack of turning around businesses, as evidenced by the performance of the Demaneng mine.
Although margins had shrunk in the construction materials side, this segment was likely to continue to trade relatively well, considering the downturn in the overall construction industry, by supplying materials to smaller government and private sector projects around the country.
A due diligence was under way regarding Afrimat’s plan to acquire Universal Coal, a company listed on the Australian Stock Exchange, with operations in South Africa, for A$0.40 (R3.96) for each Universal share held.
Industrial mineral producing operations across all regions as well as the iron ore business,were the main contributors to Afrimat’s results, management said.
“The political uncertainty and economic slowdown experienced during the last quarter of the previous financial year continued during the current year and impacted the construction materials businesses the most.”
The bulk commodities segment, consisting of the Demaneng iron ore mine, contributed positively to results, which offset the lower performance of the construction materials businesses.
The industrial minerals segment’s performance was slightly down after a slow first half and a better second half.
Net cash from operating activities increased 46.4 percent to R410.5 million (excluding once-off employeerelated accruals of R79.5m for the Afrimat BEE Trust, paid in the prior year), which resulted in a decrease of the net debt:equity ratio to 23.8 percent from 35.5 percent in the prior year.
Goodwill in Afrimat Concrete Products of R20.5m was impaired. Further changes to goodwill relate to the finalisation of the purchase price allocation of Afrimat Demaneng.
At the Demaneng mine the recommissioning of both its dense media separation plants in the first half and completion of the expansion of the load-out facility meant stable production volumes during the second half.
Industrial minerals businesses across all regions delivered solid results, although the impact of the slowdown in the construction sector was experienced by the Lyttelton mine.
The construction materials segment felt the brunt of the slowdown, with the KwaZulu-Natal and Gauteng businesses impacted the most. The KwaZulu-Natal business was restructured.
The Western Cape aggregates business continued to deliver solid results.