JOHANNESBURG (miningweekly.com) – JSE-listed construction company Afrimat has acquired construction products provider WG Wearne’s quarry, Wearne Aggregates, located in Bethlehem, in the Free State, through its subsidiary Rodag Holdings,  as well as Wearne Ready Mix Concrete, for R30-million.

The Wearne Bethlehem plant and equipment, which comprised the plant and quarry operating equipment, were also included in the transaction, which was finalised on Wednesday.

Speaking to Engineering News Online at an Afrimat investor open day in Johannesburg, Afrimat CEO Andries van Heerden said that WG Wearne would dispose of noncore assets as part of its cost reduction process to bolster its balance sheet.

“The asset fits well into Afrimat’s model of being a strong player in the rural geographic markets. [The quarry produces] a very high quality aggregate and it fits well into our management structures,” he added.

Meanwhile, Van Heerden noted that South Africa’s construction industry was in a good phase and that Afrimat saw a lot of activity in the smaller project space.

He explained that spending on roads was currently the highest it had ever been in South Africa.

“In 2006, South Africa spent R10-billion on roads and, in the last year, R34-billion was spent. Water and sanitation and low-cost housing have also picked up a lot,” he said.

He noted that the group saw a drive from government towards job creation and the stimulation of black economic empowerment.

Van Heerden said that Afrimat mostly supplied to smaller businesses, noting that the group could supply “from a half-truck load to a trainload”.

Speaking about the group’s various subsidiaries, he stated that Afrimat’s traditional business was well positioned and was the ‘cash cow’ of the Afrimat group, as it had a strong position in the market.

He added that the company’s dolomite-producing Glen Douglas mine, located in the Vaal area in Gauteng, was in a healthy state.
The mine held a new-order mining licence and had reserves in hand for the next 30 to 40 years. Further, high levels of metallurgical dolomite were produced at sustainable levels and supplied to the steel industry.

Glen Douglas produced a wide spectrum of aggregate products and the largest segment served was the readymix industry.

Other segments served included the concrete products and brick-making industries.
“It should grow with single-digit real-growth figures over the next couple of years,” he said.

The most profitable business in the group, Van Heerden pointed out, was Afrimat subsidiary Clinker Supplies.

“We had a few challenges regarding limited resources, which, to a large extent, have been addressed,” he said, pointing out that the company should have high single-digit and low double-digit real growth over the next couple of years.

“Afrimat Contracting International, meanwhile, is used to exploit opportunities and, to a large extent, is Afrimat’s business planter, breaking into new markets for us.”

Meanwhile, Afrimat subsidiary dolomite producer Infosors, located in Centurion, Gauteng, along with its newly acquired Cape Lime business, were two of the most exciting assets the company currently had in terms of growth potential.

Cape Lime was acquired in 2015 for R276-million in cash and shares.

The acquisition included Cape Lime’s operations in Vredendal and in Robertson, in the Western Cape, which each had a remaining resource life in excess of 30 years.

“Cape Lime is our latest acquisition and we see great potential in it, specially with our marketing approach,” he said.

FINANCIAL POSITION
Since 2008, Afrimat’s headline earnings a share have grown by 26% a year and, since the company’s listing in 2006, Afrimat had seen a compound average growth rate of 11.4%.

In its latest financial results for the year ended February 29, the group improved its operating margin to 16.3% from 14% the year before, while also improving its cash generation from operations to R320.3-million, from R261.6-million the year before.

Overall cash and cash equivalents increased by 206% year-on-year to R77.4-million as at February 29.

“We have positioned the business to continue its growth path, which is why we made the Cape Lime acquisition and bought the quarry in Bethlehem, and we have many other projects in the pipeline,” he said.

He pointed out that the company had also embarked on a very strong training and development programme and had seen great results with young people that were brought in as interns.

Van Heerden highlighted that a significant amount of these interns had found permanent jobs in the Afrimat group, and those who could not be accommodated had been absorbed into various positions in the industry.

“Our skills development programme has helped us create a deep skills pool and we have noticed that the industry’s skills pool is becoming very representative of the country’s population,” he said.

He stated that Afrimat was unique because all of its competitors were battling with bad balance sheets and “were in deep trouble”.

He pointed out that Afrimat was sitting with strong balance sheets and had been invited by business rescue practitioners to look at opportunities.

“One important thing that we did [to maintain our strong position in the industry] was strike a good balance between being operational and not over extending ourselves in terms of taking on too much debt,” he concluded.