Afrimat interim results driven by diversification
Afrimat released its interim results for the six months ended 31 August 2017.
Image credit: Afrimat
Open pit mining company Afrimat, which provides industrial minerals, commodities and construction materials, has released its interim results for the six months to 31 August 2017.
Revenue was flat at R1.2-billion but headline earnings per share increased by 7.4% from 95.2 cents to 102.2 cents. The contribution from the aggregates and industrial minerals segment to revenue was 69.2%, commodities 2.5% and concrete based products contributed the balance of 28.3%.
Afrimat CEO, Andries van Heerden, says he is satisfied with the results, given current market conditions, particularly during the first quarter of the financial year. “Afrimat has since its inception subscribed to being diversified across both products and locations, being deeply knowledgeable about its market and products, driven by an awareness of cost management. This stood us in very good stead in this market.”
“We are pleased to advise shareholders that our dividend policy of maintaining a 2.75 times dividend cover remains in place and an interim gross dividend of 20 cents per share has been declared,” he adds.
The first quarter was impacted by an unusually low number of effective trading days in April 2017 and by major political events that severely impacted business confidence. However, this was balanced by the exceptionally good results delivered in the second quarter. “We are particularly pleased with the results from the traditional construction materials business in the Western Cape and Industrial Minerals divisions Infrasors and Cape Lime,” says Van Heerden.
Cash generation was temporarily impacted by investments in additional clinker stock for SA Block, and working capital for the recently acquired small iron ore mine Diro. The latter also affected the commodities segment of the business.
Prior to Afrimat’s acquisition, Diro’s operations were halted due to financial distress, and the mine was placed into formal business rescue on 7 June 2016. Diro concluded a final product sale agreement for its iron ore product on 16 August 2017 and formally exited business rescue, commencing delivery soon thereafter. Diro operations are currently in a ramp-up phase, with the first dense medium separation (DMS) plant already in production.
“Good progress is being made with the recommissioning of Diro, and this is largely being assisted by the skill sets that Afrimat has in this commodity,” says Van Heerden.
The acquisition of the Emfuleni Clinker Ash Dump, situated in Vereeniging and close to Afrimat’s customers, will ensure an additional three to four years to the lifespan for Clinker Supplies Proprietary Limited. “Clinker is an important product in our offering and we continue to investigate further options to secure additional clinker resources for the group,” Van Heerden explains.
The concrete-based products segment was impacted by difficult market conditions, with Afrimat experiencing market contraction in KwaZulu-Natal, which impacted the results, according to Van Heerden.
Operational efficiency initiatives aimed at expanding volumes, reducing costs and developing the required skills levels across all employees, remains a key focus in all operations. “In my opinion Afrimat is well positioned to capitalise on its strategic initiatives, such as the continued growth from the diversified asset base. We have the ability to expand the unique product range and turnaround initiatives of selective acquisitions,” Van Heerden says.
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