Roy Cokayne
Afrimat has taken proactive steps to protect its broad-based black economic empowerment (BEE) status and mining rights.
The listed construction materials company also believes it is well positioned to take advantage of opportunities in South Africa’s renewable energy sector, which it expects to be a major driver of construction activity in the future as the country continues to search for alternative energy sources.
Afrimat chief executive Andries van Heerden said on Friday that the company had again displayed its forward-planning abilities by addressing its BEE ownership in advance of the upcoming expiry of existing BEE shareholder Mega Oils’ seven-year “lock-in” period at the end of November.
Van Heerden said that Afrimat had increased its funding to the group’s own BEE Trust, which benefits black employees, to buy the 6.4 million Afrimat ordinary shares held by the Mega Oils special purpose vehicle at a price of R6.18 a share.
Following the finalisation of the transaction, Mega Oils will retain 6.2 million directly held shares and the Afrimat BEE Trust 30.4 million shares.
Van Heerden said Afrimat’s move eliminated the potential risk to its mining rights posed by losing its BEE status while at the same time empowering its own black employees.
He said the transaction was funded from existing cash reserves. A fairness opinion on the transaction had been obtained and all regulatory requirements had been met.
Afrimat said in its interim financial results statement released in November last year that existing BEE shareholders and its black employees together held a total of 26.12 percent of Afrimat’s issued shares.
However, it stressed that despite a fully empowered ownership platform, the group remained dedicated to enhancing all aspects of broad-based BEE on an ongoing basis.
Van Heerden said the renewable energy sector was showing signs of considerable growth, with opportunities for Afrimat as tenders demanded at least 540 000 cubic metres of concrete for only the first phase of contracts in the Renewable Energy Independent Power Producers Programme.
“Due to its wide geographic footprint, Afrimat was ideally positioned to supply construction materials to this sector,” he said.
Van Heerden said the bulk of renewable energy activity in South Africa was likely to be centred on wind farms, with a number of solar power projects also due to commence in the short term.
He added that Afrimat’s recent R33m acquisition of a majority stake in resources group Infrasors had strengthened its foothold in the industrial minerals sector and further expanded its geographical reach across South Africa.
Since the initial announcement of the acquisition in January, all conditions precedent had been met, triggering the change of control on March 1 and Afrimat’s announcement on March 4 of its mandatory offer to the remaining Infrasors shareholders.
Afrimat has offered the remaining Infrasors shareholders 35c a share, the same price at which it bought the initial 50.7 percent from Hanchurch Asset Management and retiring Infrasors management.
Van Heerden said the Infrasors acquisition made strategic sense in light of Afrimat’s existing operation at the Glen Douglas dolomite mine, which was acquired in January 2011 and successfully turned around.
Van Heerden said silica was an additional complementary product for Afrimat brought on board by the Infrasors deal and the group had expanded its footprint in the northern provinces without needing to create additional capacity.
He added that Afrimat was on a firm financial base and its low debt levels indicated it was in a robust cash-generating position supported by healthy cash flows, a well-managed balance sheet and margins ahead of the industry.
Afrimat shares rose 0.61 percent to close at R8.25 on Friday. Infrasors was unchanged at 45c.