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Afrimat attributes growth to diversification strategy

28th November 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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JSE-listed openpit mining and materials company Afrimat has 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 says the growth in the six-month period reflects 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 benefited from a management restructuring, largely owing 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”, says 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,” says Van Heerden, with much of this recovery linked to government work aimed at improving service delivery.

He adds that Afrimat has exited its loss-making Namibian business. However, the company is now active in Mozambique, where it supplies ballast for a railway contract, while it also operates a small quarry with a local partner.

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

Van Heerden says Afrimat is looking at another asset outside South Africa, and even outside Africa, but does not want to divulge any more information.

Gazing into the future, he says he has 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 is likely to remain in oversupply for a number of years, while the local steel market is struggling.

Afrimat supplies products into both these markets.

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

Afrimat is 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,” notes Van Heerden.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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