Afrimat gains rise by 94.3% in six months
CAPE TOWN – Afrimat shot the lights out in lifting headline earnings a share by 94.3 percent to 181.9 cents in the six months to August 31. Chief executive Andries van Heerden said in a presentation yesterday that these were “the best set of results since we listed 13 years ago.”
Revenue for the group which mines industrial minerals, bulk commodities and construction materials, was up 19.9 percent to R1.7 billion. The strong rise in earnings was mainly due to an improvement across all three business segments, and a particularly good performance from the bulk commodities segment due to a high iron ore price. The group’s operating profit margin increased to 18.5 percent from 14.1 percent.
Van Heerden said the exceptional results were driven by the group’s strategy of diversification, cost reductions and efficiency improvement initiatives. They had never missed a dividend since listing. Afrimat was well diversified, it was high on cash-generating ability and its operations were highly scalable.
Annual compound headline earnings per share growth was about 20 percent to the end of the 2018 financial year, and “we hope to improve on that at year-end,” he said. The product range was diversified in that it included aggregates and concrete-based products as construction materials and limestone, dolomite and silica as industrial minerals as well as iron ore as bulk commodities.
A dedicated business development team was successfully identifying and pursuing opportunities in existing markets and anticipated new high-growth areas in southern Africa, he said.
An interim gross dividend of 36 cents per share was declared, well up from 19c for the period to end-August 2018.
Net cash from operating activities increased 192.1 percent to R425 million, which resulted in a decrease of the net debt:equity ratio to 9.4 percent from 35.7 percent in the prior reporting period. The debt included leases in line with new international financial reporting standards.
The bulk commodities operations, consisting of the Demaneng iron ore mine, continued to deliver a healthy contribution to the results. It generated 28.9 percent of revenue.
Revenue in this segment increased by 77.5 percent to R497.7m and operating profit increased by 176.2 percent to R138.2m as a result of a higher increase in volumes and favourable pricing.
“We all know that commodity prices fluctuate. Afrimat benefited from a period of excellent iron ore prices, which have since decreased from highs of $120 (R1 776) per ton to around $86 per ton. A provision was raised for decreased iron ore prices relating to open contracts at the end of the period. The decrease was offset by excellent plant efficiencies,” Van Heerden explained.
Industrial minerals businesses across all regions delivered strong results, with revenue increasing by 5.2 percent to R299.2m. Operating profit increased 50.4 percent to R62.4m.
Van Heerden said the strong growth was attributable to these businesses successfully entering new markets, increasing activity, reducing costs and implementing efficiency initiatives.
After the slowdown experienced in the construction materials segment during the prior period, this segment experienced a marginal recovery, with revenue and operating profit increasing by 6.1 percent and 6.5 percent respectively. He said construction activity was starting to “pick up slowly.”
“We foresee continued growth from an excellent asset base and expect further expansion of our range of unique products”, said Van Heerden.