Afrimat has published its interim results for the six months ended August 2022 reporting an increase of 7.2% in group revenue from R2.4 billion to R2.6 billion.
The group’s operating profit decreased by 12.1% from R582.8 million to R512.2 million, resulting in the operating profit margin setting at 19.7%. Headline earnings per share of 252,2 cents were decided with the board declaring an interim gross dividend of 40 cents per share (August 2021: 40 cents per share).
Andries van Heerden, CEO of Afrimat, said that strategic initiatives contributed positively to performance in the first six months of the financial year. These included the successful commissioning of the Jenkins iron ore mine, the turnaround of the Nkomati anthracite mine, and the group’s continuous improvement of existing operations.
“Diversification, cost reduction and efficiency improvements remain the cornerstone of our strategy and we used these to counter economic impacts, which are beyond our control,” he added.
He went on to say that the results had been negatively affected by the downturn in iron ore prices, the economic slowdown, and the rise in input costs such as diesel, explosives, and electricity, although this was mostly offset by the results of strategic initiatives.
The group’s balance sheet remains strong, with a net cash balance of R772.7 million. Net cash from operating activities of R784.1 million was generated, as well as R680 million from a successful equity raise during the period.
“At present, the group is considered debt free as the cash balance exceeds the borrowings, with sufficient capital to execute on the group’s strategic plans to support Afrimat’s future growth,” he said, adding that new business development remains a key component of Afrimat’s growth strategy.
Afrimat consists of four operating units – construction materials, industrial minerals and bulk commodities with its latest addition, future materials and metals consisting of phosphate, vermiculite, and rare earth elements.
The bulk commodities segment, consisting of Demaneng and Jenkin iron ore mines, and the Nkomati anthracite mine, contributed 76.8% to the group’s operating profit however, the industrial minerals business across all regions felt the impact of the economic slowdown which resulted in a decrease in operating profit from R49.6 million to R36.8 million.
The construction materials segment experienced the brunt of the slowdown in economic activity, with Western Cape businesses being impacted the most due to an overall reduction in construction across the province. The KwaZulu-Natal businesses showed a good improvement when compared to the previous period, primarily because of an uptick in construction. The operating profit of this segment remains relatively flat from the comparative period with a slight decrease from R77.8 million to R73.1 million.
Future materials and metals has been added to the group’s operational segments in support of its diversification strategy. “Glenover is a new project and one which diversifies our exposure wider than ferrous metals and aligns to global trends. It brings us a threefold exposure – fertiliser for agricultural applications, vermiculite for industrial and horticultural applications, and rare earth elements that support technological advancements such as high strength permanent magnets and battery technology,” said van Heerden.
Sales are currently generated from high-grade phosphate (fertiliser) material, with testing and design work currently underway for vermiculite and single super phosphate (SSP) plants. “Stage 2, which includes test work for nitro-phosphate and rare earth processes are making good progress. After we complete this stage, detailed designs will inform the final capital requirements.” The group’s board has approved R300 million to purchase all the shares in Glenover. During the period under review, Glenover generated revenue of R17.8 million with start-up losses of R3.9 million.
Looking ahead, van Heerden said that 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.
