Afrimat still on the acquisition trail after robust interim earnings
AFRIMAT, the construction materials, industrial minerals and bulk commodities group, is working on another acquisition after strong iron ore prices, cost and efficiency initiatives boosted cash and earnings growth in the six months to August 31.
Chief financial officer Pieter de Wit said in a telephone interview yesterday that the balance sheet was healthy and debt-free, the group had funded two previous acquisitions in the interim period from its own cash resources, and that they could not yet disclose the details of the next acquisition. Many exciting opportunities were being investigated, he said.
The interim results were boosted by favourable iron ore prices. He said iron ore prices had since fallen sharply, but the iron ore business was still operating at better average margins than the construction materials and industrial minerals operations. Revenue increased by 55.4 percent to R2.4 billion culminating into a 65 percent increase in operating profit to R582.8 million.
The operating profit margin improved to 24.1 percent from 22 percent. Headline earnings per share increased by 60.5 percent to 295.1 cents.
The group ended the interim period with cash flows from operating activities of R806.5m, a 141.7 percent increase from the comparative 2020 period. In August the Jenkins iron ore mine was acquired and in May a deal to acquire the Gravenhage manganese mine was announced.
The bulk commodities segment benefited from favourable iron ore pricing and from the Jenkins mine, which sold its ore in the local market, and Nkomati, which sold anthracite also in the local market, which contributed positively to the results. Nkomati was, however, loss-making for the first five months of the period.
De Wit said the second half results would benefit from the Nkomati and Jenkins mines coming fully on stream.
The construction materials segment experienced a return to preCovid volumes, and operating profit in the segment improved to R79.5m from R2.8m.
De Wit said the higher volumes were more of a recuperation to 2019 levels, rather than a rise in construction activity, and there was not yet any significant sign of an improvement in infrastructure spending in the country.
The bulk commodities segment
reported 39.3 percent growth in operating profit of R453.7m, largely due to favourable iron ore pricing during the period.
The industrial minerals businesses experienced a return to pre-Covid-19 volumes across all regions, delivering an increase in operating profit of 108
percent to R51.1m.
In the second half, production of the Jenkins iron ore mine would be ramped up to the planned annual volumes of 1.25 million tons of iron ore sales into the local market.
Afrimat shares closed 6.97 percent higher at R51.70 on the JSE yesterday.