Increased demand from road and rail industries boosts Afrimat’s construction materials’ revenue

Afrimat has published its results for the year ended February 2024, reporting a revenue increase of 23.9% from R4.9 billion to R6.1 billion. The Group’s operating profit increased by 19.8% to R1.2 billion (2023: R961.6 million), delivering an operating profit margin of 18.9%.

During the first half of the financial year, Afrimat invested substantially in projects expected to yield returns and further strengthen diversity and competitive advantage. One such project was the Nkomati Anthracite Mine which delivered a healthy return at yearend.

The diversified position Afrimat has adopted, together with the efficiency projects that are in place, helped the Group to counter impactful economic headwinds,” comments Group CEO, Andries van Heerden.

The Group’s headline earnings per share strengthened by 24% to 567.30 cents from 457.60 cents.

Afrimat continues to focus on cash generation and preservation. Its balance sheet remains strong with cash and cash equivalents at yearend of R504.7 million, an 80.7% improvement on the previous year. Net cash from operating activities of R12 billion was generated.

Its debt: equity position remains strong at 1.4% compared to 4.5% in 2023. It is expected that this ratio will increase as the Lafarge integration takes place. Afrimat will simultaneously ensure that cash generation is robust, allowing the Group to quickly pay back debt.

The Board declared a final dividend of 154 cents per share (2023: 110 cents per share), in line with the Group’s dividend policy of 2.75 times cover. The total dividend (interim and final) for the year amounts to 194 cents per share (2023: 150 cents per share).

Afrimat’s construction materials segment experienced a 22.3% increase in revenue from R1.8 billion to R2.2 billion and an improvement in operating profit of 111% to R273.5 million compared to the previous year of R129.6 million. The uplift in revenue was the result of increased demand from road and rail industries, while improvement in operating profit was further driven by efficiency improvement programmes.

Van Heerden says that Afrimat is excited and ready for the Lafarge integration now that all the preceding conditions have been fulfilled.

The acquisition will increase Afrimat’s offering in the construction materials space by expanding the Group’s quarry and ready-mix operations nationally. Additionally, access to the fly ash operations provides a foothold in the cement extender market. The grinding plant will allow Afrimat to grind materials as value-added products for our own operations as well as for our customers, while the cement kilns allow the Group to enter the cement value chain competitively.”

Afrimat entered into a share purchase agreement with a Holcim Group subsidiary, Caricement B.V., in which the Group will acquire 100% of the issued share capital of Lafarge South Africa Holdings Proprietary Limited. The acquisition has been structured as a locked box transaction, effective 31 December 2022, and the purchase consideration payable is in the amount of US$6 million. In addition to this, Afrimat agreed to repay or procure the repayment of the loan amounts owed equating to R900 million.

The purchase consideration of US$6 million and the first tranche of the loan amount of R500 million was paid on the 17th of April 2024. The remaining balance of R400 million is payable within twelve months after the closing date.

Afrimat took over operational management on the 23rd of April 2024.

Van Heerden explains that the integration of the Lafarge transaction brings Afrimat full circle to its origins in quarrying, and the additional products, together with a broader national footprint, could positively alter the delivery capability of the Group and the Construction Materials segment. “This is an exciting project, which is expected to deliver good results in future,” he concludes.