Afrimat delivers strong interim results on the back of favourable iron ore market

Afrimat has released its interim results for the six months ended August 2021, delivering impressive results on the back of favourable iron ore prices, which translated into strong operating cash flows. The group declared an interim gross dividend of 40 cents per share for the period.

CEO, Andries van Heerden, said he was pleased with the group’s performance: “We are really now in a very healthy financial position, and we are able to accelerate growth as a result. We also have assets with excellent competitive advantages across the group, which we have been building over several years in line with our diversification strategy. But more than that, as a company built and forged in South Africa, we are proud to have a deep-seated focus on delivery more than just financial results to the benefit of all our stakeholders, including our shareholders, our people, and the communities in which we operate”.

The group’s revenue increased by 55.4% from R1.6 billion to R2.4 billion, culminating in an increase in operating profit from R353.1 million to R582.8 million. Its operating profit margin improved from 22.7% to 24.1%, with headline earnings per share (HEPS) up by 60.5% from 183.9 cents to 295.1 cents, representing a compound annual growth rate from 2017 to 2021 of 30.20%.

Afrimat’s balance sheet is robust, with a net cash position. The company ended the period with net cash flows from operating activities of R806.5 million, an increase of 141.7% from the comparative 2020 period. This represents compound annual growth of 60% (2017 – 2021).

Given the strong cash generated from operations of close to R1 billion, borrowings were significantly reduced, which places the group in this net positive cash position,” said Van Heerden.

Operational review

Van Heerden added that all these segments of the group experienced robust growth compared to the previous corresponding period, considering the effects of hard lockdown levels.

Although the pandemic remains an important part of our strategic management, the disruption in mid-June related to the third wave was countered by maintaining the measures established by management to manage and minimise the spread of the virus, as well as a safe operating environment for our employees”.

All operating units are strategically positioned to deliver outstanding service to the group’s customers, while acting as an efficient hedge against volatile local business conditions, he added.

Our transition through conscious diversification has resulted in a varied product range, made up of ‘Construction Materials’ consisting of aggregates and concrete-based products, ‘Industrial Minerals’ consisting of limestone, dolomite and silica, and ‘Bulk Commodities’ consisting of iron ore and anthracite.”

The ‘Bulk Commodities’ segment, comprising of the Demaneng and Jenkins iron ore mines, and the Nkomati anthracite mine, contributed to the group’s results with an increase of 39.3% in operating profit to R453.7 million, compared to R325.8 million in the prior period. This was mainly due to the favourable international iron ore pricing during the reporting period.

According to Van Heerden, the new mines, namely Jenkins (iron ore sold in the local market) and Nkomati (anthracite also sold in the local market) contributed positively to the results.

With Jenkins successfully coming into production, the ramp-up is in accordance with strategic plans and product is being sold into the local market through a defined price contract. Nkomati, which turned from realising start-up losses to also contributing positively to the segment’s result in August, produces a high-quality product sold into the local market as a replacement for imported anthracite.”

The ‘Industrial Minerals’ businesses experienced a return to pre-Covid-19 volumes across all regions, delivering an increase in operating profit of 108,0% from R24.6 million to R51.1 million.

‘Construction Materials’ also experienced a return to pre-Covid-19 volumes, resulting in a significant improvement in operating profit from R2.8 million to R79.5 million in the reporting period. This was primarily a result of general volumes recuperating to 2019 levels, rather than a result of a rise in construction activity, said Van Heerden.


In updating the market on recent acquisitions, he mentioned that with respect to the Gravenhage Manganese Mining Right, or Gravenhage as it is commonly known, conditions precedent are still outstanding, which include the Section 11 approval of the mining right transfer and the water use license applications. “In the background, we are still refining the mine planning and business plan to identify the most optimal and lowest risk implementation strategy.”

Van Heerden said that on-site activities would only start once all the conditions precedent had been met.

In conclusion, he mentioned that he is very pleased with the group’s current prospects. The recently announced projects at Jenkins and Nkomati have recently started to make significant contributions and the group remains well positioned to capitalise on exciting strategic initiatives and future opportunities.

Given its track record of successful execution of growth projects, future growth is expected to remain driven by the successful execution of its proven strategy. Focus will be on recent acquisitions and a wider product offering to the market whilst “many exciting new opportunities are being investigated.”

We will continue to focus on sustainable diversification in all three segments – in the ‘Bulk Commodity’ segment, the focus is to ramp-up the production of the Jenkins mine to the planned annual volumes of .25 million tons, with the sale of iron ore into the local market. We also have Driehoekspan and Doornpan to bring online once Demaneng volumes begin to reduce. This should be within the next three to four years, with Nkomati adding further commodity diversification as volumes ramp up further in the coming six months.”