Afrimat beats Covid to produce big profits
CAPE TOWN - Afrimat, an open-pit miner of industrial minerals, bulk commodities and construction materials, said yesterday that diversification and measures to counter Covid-19-related disruptions had resulted in a healthy increase in operating profit in the six months to August 31.
Operating profit increased by 11percent to R353.1million despite a 9.4percent decline in revenue, and due to the benefit of strong iron ore prices. Headline earnings per share was up 1.1percent to 183.9cents.
The balance sheet remained strong and the interim dividend was held at 36c.
The period ended in a net cash position compared to a net debt:equity ratio of 9.4percent in the prior year, and cash and cash equivalents of R330.6m represented a 170percent increase from the comparative 2019 period.
Chief executive Andries van Heerden said in a telephone interview that he was very happy with the results and the diversification strategy had proved its worth through the lockdown, where two of its three divisions, construction materials and industrial minerals, virtually had no turnover for a month.
He said that what had started out as a simple construction materials business had gradually become more sophisticated with the addition of industrial minerals, and then again with the addition of iron ore.
“The potential acquisition of the Nkomati mine will add anthracite to our portfolio, thereby again enhancing our skills and our commodity diversity, while the Coza Mining acquisition will further strengthen our iron ore capacity.”
A large creditor Afrimat had applied for business rescue proceedings at Nkomati, which had been granted by the court, and had received shareholder approval to proceed with the proposed scheme of arrangement. Van Heerden believed the business rescue process might be complete this year.
“The competitive advantages of location and unique metallurgy - some of the critical criteria we use when evaluating any potential - are in place at Nkomati.
“This, coupled with high market demand for high-quality, clean burning anthracite, will add tremendous value to our Bulk Commodity diversification strategy,” he said.
“High-quality anthracite is a sought-after by large smelters in South Africa for metals’ smelting, fabrication and furnaces.”
In respect of Coza, Van Heerden said the high-quality ore resource, which consists of the Jenkins, Driehoekspan and Doornpan mines located close to Afrimat’s Demaneng iron ore mine in the Northern Cape, would give Afrimat the ability to leverage resources due to the proximity to Demaneng.
It would also potentially allow for a local product supply agreement to ArcelorMittal - Demaneng iron ore mine is solely focused on the export market. He said some “exciting opportunities” in the industrial minerals division were being assessed.
All operations had recovered from the Covid-19 impact and returned to profitability before August 2020.
The Bulk Commodities segment, consisting of Demaneng iron ore mine, delivered growth of 135.8percent in operating profit to R325.8m, largely due to favourable iron ore pricing.
Industrial Minerals businesses delivered satisfactorily results, but operating profit fell 60.6percent to R24.6m from R62.4m due to the impact of the lockdown.
The Construction Materials saw no revenue in April, as well as limited revenue during May and June 2020, hence a 97.7percent decrease in operating profit to R2.8m. The segment, however, recovered post the hard-lockdown levels and was back to pre-lockdown monthly sales levels.
The group said it was poised to deliver a strong performance in the second half of the year. The share price increased 2.16 percent to R35.50 yesterday morning on the JSE, closing the day at R35.40.