Afrimat, the multi-commodity, mid-tier mining group, has come through a cycle of acquisitions as part of its strategy of asset diversification and will focus on realising the significant potential of all its businesses in the new financial year.
This is according to financial director Pieter de Wit, who was interviewed by Business Report on Thursday after the group reported a substantial decline in headline earnings per share to 72.3 cents for the year ended 28 February from 567.3 cents at the same time last year.
The aggregate quarries and ash business delivered a solid performance, but the cement business made losses throughout the year, which contributed to the lower earnings.
De Wit said they had revitalised the cement plant and it was operating well by the end of 2024, but the builders’ holiday over December and particularly high rainfall in January and February further disrupted operations. However, production was currently well underway.
Also, there were no anthracite exports from Nkomati through Mozambique due to border closures during the period. De Wit said these exports had since resumed and orders for 80% of anticipated export volumes for the new financial year had been secured.
The Bulk Commodities segment, which contributed 60% to group operating profit, reported revenue and operating profit falling 4.5% and 70.1%, respectively.
Operating profit for the iron ore mines fell 69.8% to R238.1 million due to lower US dollar prices; a 7.5% increase in shipping costs; a decrease in the lump premium of 12.4%; and a stronger rand.
Challenges on the rail line meant overall iron ore volumes were 16.5% below Afrimat’s rail allocation, and international iron ore prices had remained lower than last year.
De Wit said, however, that at least the annual decline in export volumes had stabilised, and the group, with other users of the rail line, was in constant communication with Transnet to improve the line’s efficiency. Iron ore volumes sold to ArcelorMittal South Africa improved well in the second half after a furnace freeze in the first half.
Additional debt to fund the acquisition of Lafarge resulted in significant additional finance costs. As expected, the net debt: equity increased to 48.9% from 1.4% last year, due to funding towards the Lafarge and Glenover acquisitions.
CEO Andries van Heerden said the group was committed to ensuring strong cash generation to settle the additional debt as quickly as possible.
The aggregates component of the Construction Materials segment increased operating profit by 40.2% to R383.5m, which Van Heerden said was mainly due to the successful integration of the Lafarge quarries, the fly ash business, and the ready-mix batching plants, as well as volume growth. The cement business incurred losses of R285.4m.
The Industrial Minerals businesses’ revenue was relatively flat at R575.1m, but operating profit soared 325.7% to R58.8m. Van Heerden said the suspension of load shedding was positive for the segment and its customers, supplemented by marketing initiatives and significant progress in the agricultural lime and precision farming sectors.
Group revenue increased by 36.7% from R6.1 billion to R8.3bn, with the inclusion of the Lafarge business. However, operating profit fell by 58.5% to R477m from R1.15bn.
Van Heerden said Lafarge South Africa had been integrated successfully, and the transaction became unconditional during the first quarter of this financial year.
A R262.7m gain was recognised at the interim period based on the preliminary fair values of the identifiable assets at Lafarge, but a reassessment of fair values led to a downward adjustment to the value of certain assets, and the bargain purchase gain was derecognised.
“Our long-term growth strategy is underpinned by a diversified asset base in the mining, quarrying, and related industries, and we continue to be renowned for acquiring distressed assets and turning them into profitable and sustainable businesses,” said Van Heerden.
Visit: www.businessreport.co.za
