Bulk commodities boost Afrimat’s interim profit

31st October 2019

By: Marleny Arnoldi

Deputy Editor Online

     

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JSE-listed industrial minerals and construction materials group Afrimat achieved a 56.9% year-on-year increase in operating profit to R318-million for the six months ended August 31.

CEO Andries van Heerden attributed the higher profit to an improved performance in each of its business segments, but especially the bulk commodities segment.

The bulk commodities segment, consisting of the Demaneng iron-ore mine, continued to deliver a healthy contribution to the group’s results, accounting for 28.9% of the company’s R1.7-billion revenue for the six months under review.

Van Heerden said impressive increases in volumes and favourable pricing supported the segment’s performance.

The industrial minerals business segment reported strong growth, with operating profit having increased by 50% year-on-year to R62-million.

The segment’s strong growth was achieved by entering into new markets, increasing activity, reducing costs and implementing efficiency improvement initiatives.

Van Heerden mentioned that some open contracts were still being finalised that would have resulted in an even better performance, had they been included in the results for the six months under review. 

Afrimat also sees potential to add more industrial minerals to its portfolio, which already includes dolomite, limestone and silica. 

CFO Pieter de Wit, meanwhile, reported that Afrimat’s net cash generation had grown at a compound annual growth rate (CAGR) of 41.7% from 2014 to 2019, while its dividend had grown at a CAGR of 22.6% over the five-year period. 

The company declared an interim dividend of 36c apiece for the period under review.

CONSTRUCTION MATERIAL
Following a slowdown in the construction materials segment in the first half of the prior year, operating profit increased by 6.5% year-on-year to R122-million for the period under review.

The KwaZulu-Natal business reported improved results following a successful restructuring process.

The Western Cape aggregates business delivered solid results in the interim period under review, but the Gauteng business was still suffering the effects of the economic slowdown.

The Mozambique business continued to supply construction materials to smaller projects in the northern region of the country, in anticipation of the major liquefied natural gas project.

Van Heerden noted that he was starting to see a slow recovery in the construction sector in South Africa, mostly owing to smaller contracts spread across the country. 

“The group is well positioned to capitalise on its strategic initiatives. We foresee continued growth from an excellent asset base and further expansion of its range of unique products. The continuation of selective acquisitions is expected to deliver good results.

“Operational efficiency initiatives aimed at expanding volumes, reducing costs and developing the required skill levels across all employees remain a key focus in all operations,” Van Heerden noted.

Afrimat expects the current business climate to continue with the group's future growth driven by the successful execution of its proven strategy, recent acquisitions and a wider product offering to the market.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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