JSE-listed construction materials supplier Afrimat on Thursday reported solid results for the six months ended August 31, but raised alarm bells over the growing tendency for slow payment by government and State-owned enterprises.

“It was an extremely difficult year, so we are grateful for these results, which show a nice upturn,” said CEO Andries van Heerden.

Revenue for the company increased by 21,2% compared with the same period in 2008. Operating profit grew by 22,1%, with headline earnings a share up by 20,8%.

The company's operating margin increased to 17%, up from 16,8%.

Afrimat declared a 6c dividend.

Most of the company's work flowed from the infrastructure sector.

However, while adding to its profitability, this had also had a negative effect on the company's debtor days, which had deteriorated to 67 days from the 66 days recorded in August 2008.

Afrimat was battling with government and its State-owned parastatals, such as Eskom, to receive payment, explained Van Heerden.

Afrimat Cement Products, and Afrimat Ready-mixed Concrete (KwaZulu-Natal and Free State) MD Dr Jan van Heerden said government was taking two to three months to settle its bills, as opposed to the required 30 days.

“This puts pressure on our cash flow.”

He believed government had indeed budgeted for its infrastructure drive, but now found its anticipated revenue stream to be under pressure as it battled a recession.

“I foresee this getting worse,” he added.

“We are consulting with the [provincial] MECs to try and solve the problem.”

Andries van Heerden added that the “guy who barks the hardest gets helped first”, and that the company was working hard at ensuring government settled its bills on time.

DIVERSIFICATION ON THE MENU

Van Heerden said Afrimat was looking at diversifying into associated industries, with possible acquisitions and cross-border work also on the menu.

He believed the time for construction industry consolidation had returned, with the pricing of assets “more realistic”.

He said it would be possible to “save” some distressed companies. He added that he did not expect some of the smaller materials suppliers to survive the recession.

Van Heerden also noted that the company was seeking to diversify into another industry, noting that he could not yet provide more information.

“We have been working on this for a few months already.”

The plan was, however, to consolidate a fragmented market “closely related” to the construction materials industry, in a similar fashion to what Afrimat had done in the aggregates market, Van Heerden explained.

“There are some exciting opportunities in other products.”

He said the company was also “peeping across the border” to see what opportunities existed outside South Africa, as part of its diversification strategy.

Van Heerden, who described Afrimat as “open-pit miners” expected a lull in the construction industry after 2010 in Gauteng specifically.

He also anticipated the residential market to “at least” remain depressed for another 12 to 18 months.

This said, though, he added that the construction industry was still "the best performing sector" in the current economic environment.

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