CEO Andries van Heerden
During its financial year to February 29, midtier mining and materials company Afrimat invested considerably in projects that are expected to yield fruitful returns and further strengthen diversity and competitive advantage, group CEO Andries van Heerden said.
One such project was the Nkomati anthracite mine, which he said delivered a healthy return.
Diversification and efficiency improvement initiatives remain the cornerstone of the group’s strategy to mitigate economic impacts that are beyond management's control.
Van Heerden said he was “exceptionally pleased” with the group’s performance, which was supported by a 23.9% year-on-year increase in revenue to R6.1-billion.
Operating profit increased by 19.8% to R1.2-billion, delivering an operating profit margin of 18.9%.
“The diversified position Afrimat has adopted, together with the efficiency projects that are in place, helped the group to counter impactful economic headwinds,” Van Heerden averred.
Headline earnings per share strengthened by 24% to 567.3c.
Afrimat continues to focus strongly on cash generation and preservation.
The group’s balance sheet remains strong, with cash and cash equivalents at the end of the year of R504.7-million, an improvement of 80.7% on the previous financial year.
Net cash from operating activities of R1.2-billion was generated.
The debt:equity position remains strong at 1.4% compared to 4.5% in 2023. This ratio is likely to increase as the Lafarge integration takes place.
Afrimat said it would simultaneously ensure that cash generation was robust, allowing the group to quickly pay back debt.
The board declared a final dividend of 154c apiece, in line with the group’s dividend policy of 2.75 times cover.
OPERATIONAL REVIEW
The Bulk Commodities segment, which comprises the iron-ore mines and an anthracite mine, contributed 83.1% to the group’s operating profit.
This segment benefited from the stellar performance of Nkomati, which recovered strongly in the second half of the year, delivering healthy market volumes.
The traditional dip in the iron-ore price in the last quarter of the year did impact on the overall results, but despite this, a favourable rand:dollar exchange rate and operational efficiencies assisted in offsetting this.
The iron-ore mines recorded an overall increase of 24.3% in sales volumes, with local sales having increased from 502 404 t to 882 168 t and international sales tonnages decreasing from 778 072 t to 709 709 t.
The slowdown in export volumes was owing to limitations on the export rail line. Challenges on the domestic rail line were successfully countered by trucking products from the mine, with the group able to supply additional volumes of iron-ore into the domestic market as a result.
The segment continues to generate a strong operating profit margin of 32.4%, in line with the previous year of 31.8%.
The Industrial Minerals businesses, which accounted for about 1.2% of the group’s operating profit, delivered a “disappointing” result, Afrimat said, with revenue and operating profit having decreased to R554.5-million and R13.8-million, respectively.
Diesel generators installed to keep operations in production have been successful in mitigating the effects of loadshedding, but the overall impact of power cuts on the segment's clients and respective industries is being felt in terms of reduced demand, the company points out.
The 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 with the previous year.
The uplift in revenue was the result of increased demand from the road and rail industries, while the improvement in operating profit was further driven by successful efficiency improvement programmes.
The Future Materials and Metals segment supports the group’s diversification strategy. Glenover is the segment’s first project, and it expands Afrimat’s exposure beyond only ferrous metals.
Glenover is a greenfield project that started producing its first products during the year to be ready to take advantage of the upcoming agricultural season. Revenue improved in the second half of the year, with the project generating a total revenue of R31.3-million. Startup losses were still incurred, however, with an operating loss of R12.9-million recognised at year-end.
OUTLOOK
Afrimat said it would continue to fortify its diversified position to ensure sustainability and growth into the future.
It now has different project maturation profiles, with the current focus being on implementation to ensure optimal value is achieved. Given this, the group said it would remain cautious and prudent in all its capital allocation decisions.
Van Heerden reiterated that the operating environment in South Africa remained challenging, but said Afrimat continued to see value in its diversification strategy.
“Stringent capital allocation, efficiency improvement initiatives and a strongly diversified portfolio remain the cornerstone of the group,” he averred.