Afrimat, the construction materials, bulk commodities and industrial minerals group, lifted headline earnings per share (Heps) by 4.4% to 263.4 cents in the six months to August 31 in a period of substantial investment towards the future of the company.
Group revenue increased 9.6% to R2.8 billion. An interim dividend of 40c a share was declared. Net cash from operating activities came to R577.5 million.
Deputy chief financial officer André Smith said they had expected slightly higher growth in Heps, but they had hoped that the Nkomati mine would have made a bigger contribution to earnings at this stage, as its commissioning was taking longer than expected.
However, investment into the anthracite mine by opening the underground shaft, the first underground shaft for the group, in addition to the two opencast pits had been finalised and the focus was to reach a steady state of production as soon as possible, and it was expected that there would be an improved performance from the asset in the second six months.
He said they had chosen to be cautious in getting the Nkomati mine into operation for a number of reasons.
Smith said their diversification strategy continued to pay off and the particular focus for the next six months was to get Nkomati mine, the Glenover phosphate mine and the recently announced LaFarge South Africa acquisition optimally bedded down within the group. Regulatory approvals were still awaited for the acquisition.
CEO Andries van Heerden said diversification between commodities and revenue streams, coupled with stringent capital allocation, had enabled them to weather economic and commodity shocks.
The volatility of the iron ore price was managed by combining local iron ore sales at defined prices with export sales. Some 10% of iron ore exports were affected by rail issues, but this was offset by greater local sales and a weaker rand dollar exchange rate, said Smith.
There was also a significantly improved contribution from the Construction Materials segment, said Van Heerden.
Operating profit increased by 4.3% to R534.1m. Load shedding and a general economic slowdown in certain segments did not have a material impact on group operations.
The balance sheet remained strong with a cash balance of R278.7m. Net cash from operating activities of R577.5m was generated.
The Bulk Commodities segment, consisting of the iron ore mines and anthracite mine, contributed 72.3% to group operating profit.
“Iron ore exports continued to generate strong cash flow,” Van Heerden said. The iron ore mines recorded an overall increase of 29.7% in iron ore sales volumes.
Driehoekspan, part of the Coza acquisition, was being brought into production to maintain export volumes and add small volumes of manganese sales. The combined iron ore mines had a life of mine of more than 15 years.
The Nkomati mine contributed 18.1% to the segment’s revenue. It produces product sold into the local market, as a replacement for imported anthracite.
In the Industrial Minerals segment, businesses delivered satisfactory results, but the impact of load shedding was felt directly and also by some customers that cut back on volumes and this resulted in a 13.1% decrease in operating profit to R32m.
The Construction Materials segment reported a significant improvement in operating profit by 113.5% to R156.1m due to “efficiency improvement initiatives that proved to be successful across the segment, while increased activity in road and rail projects resulted in stronger demand for products which are used in road building, rail and infrastructure projects”.
The LaFarge acquisition included several well-positioned and resourced aggregate quarries, an integrated cement plant, cement grinding plants, cement depots, readymix batching plants and high-quality fly-ash sources which was an important extender in the cement industry.
The group added the Future Materials and Metals segment in the prior period in support of its diversification strategy.
Glenover, which is the segment’s first project, diversifies Afrimat’s exposure wider than ferrous metals and aligns it to global trends such as the advancement of technology for decarbonisation (through rare earth minerals) and food security (through fertiliser products). Glenover, a greenfields project, was in a ramp-up phase.
“The project is focused on the processing of high-grade phosphate and single superphosphate (SSP),” said Van Heerden.
The mine was in the final stages of building the SSP plant, with commissioning expected towards the end of the 2024 financial year. A high-grade optimisation phosphate plant had already been completed.