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Afrimat ups profit 18%, sees trend towards smaller projects

Andries van Heerden

Andries van Heerden

6th November 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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JSE-listed openpit mining and materials company Afrimat on Thursday reported a 10.5% increase in revenue for the six months to August 31, to R1-billion, while profit after tax jumped 17.9%, to R88.8-million, compared with the same period last year.

Full-year revenue for the company reached around R850-million in the 2011 financial year.

CEO Andries van Heerden said in Johannesburg that the growth in the six-month period reflected the group’s successful diversification strategy, implemented over the last few years.

The financial recovery at Infrasors also aided performance, although there remained room for improvement at this company, acquired 18 months ago, he added.

Afrimat also benefitted from a management restructuring, due largely to retirements within the group

Afrimat’s mining and aggregates division contributed 79% of operating profit for the six months under review, with concrete-based products at 23%.

Although the mining and aggregates business did not see much volume growth during the period – around 2% to 3% – “increased pricing came through nicely”, said Van Heerden.

The profit margin was 14% in this business.

The concrete-based products division saw a strengthening of margin to 9.6%, up from 4.8% in the six months ended August 31, last year.

Afrimat’s business can also be divided into its original aggregates and concrete-based products business, and the more recently acquired industrial minerals and niche product businesses.

“The old business is coming back in a big way,” said Van Heerden, with much of this recovery linked to government work aimed at improving service delivery.

He added that Afrimat had exited its loss-making Namibian business. However, the company was now active in Mozambique, where it supplied ballast for a railway contract, while it also operated a small quarry with a local partner.

This quarry could potentially benefit from Mozambique’s liquefied natural gas industry.

Van Heerden said Afrimat was looking at another asset outside South Africa, and even outside Africa, but did not want to divulge any more information.

Gazing into the future, he said he had never before seen the high level of pessimism currently so pervasive in South Africa’s economy.

“I don’t think it is necessary, there are opportunities out there.”

This said, however, the cement market was likely to remain in oversupply for a number of years, while the local steel market was struggling.

Afrimat supplied products into both these markets.

Roads, however, were in need of upgrades, with national and provincial government spending almost 100% of their allocated road budgets, noted Van Heerden.

Afrimat was also seeing “a definite shift in the [construction] marketplace to rural areas”.

“The trend is for small projects over a wider area. We see this trend continuing as government drives service delivery, job creation and empowerment. There is also a drive to get district municipalities into better shape.

“We do not see the big ticket infrastructure projects coming soon; they are at least one or two years out,” noted Van Heerden.

Edited by Creamer Media Reporter

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