Afrimat lifts final dividend 40% after very strong second-half performance

An Afrimat stone quarry. Photo: Supplied

An Afrimat stone quarry. Photo: Supplied

Published May 17, 2024


MID-TIER mining and materials company Afrimat lifted its final dividend 40% to 154 cents in the year to February 29 after investing in projects and focusing on strategy to diversify and find efficiencies as a way to deal with unexpected challenges.

The company also benefited from its best second-half financial performance in its history, deputy chief financial officer André Smith said in an interview.

He said there were three key drivers of this second-half performance. The first was the Nkomati Anthracite Mine that had delivered a healthy return in the second half with a more consistent production.

The second factor was that the construction materials division “continued its run” after the entire construction sector, off a low base, started seeing some improvement in the availability of tenders, particularly from the SA National Roads Authority.

Smith said the third factor was a continued strong performance from the bulk commodities division, particularly from the low-cost iron ore operations, and in spite of logistical difficulties. He said the iron ore price had started to recover from the end of March, and “hopefully the price will increase further”.

CEO Andries van Heerden said the pleasing financial performance was supported by a revenue increase of 23.9% to R6.1 billion. Operating profit increased by 19.8% to R1.2bn.

“The diversified position Afrimat has adopted, together with the efficiency projects that are in place, helped the group to counter impactful economic headwinds,” he said.

Headline earnings a share strengthened 24% to 567.3c from 457.6c.

A focus remained on cash generation and preservation. The balance sheet was strong, with cash and cash equivalents at the end of the year of R504.7 million, an 80.7% improvement on the previous year.

A healthy debt:equity position was expected to widen somewhat as the Lafarge integration took place, but Afrimat would ensure cash generation remained robust, allowing debt to be repaid quickly, said Van Heerden.

The bulk commodities segment, comprising the iron ore mines and an anthracite mine, contributed 83.1% to group operating profit.

Nkomati contributed 14.6% of group operating profit. Investment had enabled the first extraction of anthracite from the underground mine, and the establishment of two additional opencast pits, which ensured consistent feed to the plant.

A favourable rand per dollar exchange rate and operational efficiencies assisted in offsetting a traditional dip in the iron ore price in the fourth quarter.

Smith said a big focus of the new financial year would be to bed down the La Farge construction and cement making acquisition in South Africa. Afrimat took over operational management on April 23, 2024.

The iron ore mines increased iron ore sales volumes by 24.3% overall, with local sales tonnages increasing from 502 404 to 882 168 and international sales tonnages decreasing from 778 072 to 709 709.

Challenges on the domestic rail line were countered by trucking products from the mine, while additional volumes of iron ore were also supplied into the local market.

The construction materials segment experienced a 22.3% increase in revenue to R2.2bn and a 111% improvement in operating profit to R273.5m, the result mainly of increased demand from road and rail industries, while operating profit was further driven by successful efficiency improvement programmes.

In the group’s “Future Materials and Metals” segment, the Glenover mine was the first project, and it expanded Afrimat’s exposure beyond only ferrous metals, and aligned the group with global trends such as advancing technology for decarbonisation (through rare earth minerals) and food security (through fertiliser products).

Glenover is a greenfield project that started producing its first products during the year.

Van Heerden said the operating environment in South Africa remained challenging, but Afrimat continued to see value in its diversification strategy.