Midtier openpit miner Afrimat has confirmed it is in a healthy financial position and able to accelerate growth, after delivering a "pleasing" performance in the six months ended August 31.
The group posted an operating profit of R582-million, up 65% on the R353-million operating profit generated in the six months ended August 31, 2020. The operating profit margin also improved from 22.7% to 24.1%.
Headline earnings per share (HEPS) increased by 60.5% year-on-year to 295.1c.
Afrimat has been growing its HEPS at an average rate of 30.2% a year, between 2017 and 2021.
The company ended the interim period with net cash from operating activities of R806-million, which was 141% more than it ended the prior comparable interim period with.
“Given the strong cash generated from operations, our borrowings were significantly reduced, which places the group in a good net positive cash position,” says CEO Andries van Heerden.
Afrimat has declared an interim dividend of 40c apiece, compared with an interim dividend of 36c apiece in the prior comparable period.
In the six months under review, the company’s Bulk Commodities segment contributed the lions' share of group profit at R453-million, which was a near-40% increase on the prior comparable period.
Van Heerden attributes the segment’s strong financial performance to a favourable iron-ore pricing environment and new mines – the Jenkins iron-ore mine and the Nkomati anthracite mine – contributing to results.
Both mines are selling product into the local market, with Jenkins ramping up to produce 1.25-million tons of iron-ore a year.
Afrimat aims to create 500 job opportunities by the end of the 2022 financial year, as a result of the Nkomati and Jenkins operations.
Afrimat plans on bringing its Driehoekspan and Doornpan iron-ore assets online once volumes from the Demaneng mine start to diminish within the next three to four years.
The Bulk Commodities segment comprised 78% of operating profit in the six months under review, followed by Construction Materials comprising 13% and Industrial Minerals comprising 9%, relative to a split of 92%, 7% and 1% in the prior comparable six months.
Further, the company’s acquisition of the Gravenhage manganese mining right from Aquila Steel South Africa remains in progress, with a water-use licence still outstanding.
Afrimat is, meanwhile, still planning the most optimal, lowest risk implementation strategy for the asset.
Afrimat’s Industrial Minerals segment reported a return to pre-Covid-19 sales volumes, resulting in a 108% year-on-year increase in operating profit to R51-million.
The Industrial Minerals segment supplies the steel industry with metallurgical dolomite, the construction industry with aggregate products and the agricultural industry with lime.
The segment also encompasses the Cape Lime business, which supplies niche markets such as chemicals, filler, glass, paint and food products manufacturing.
The company’s Construction Materials segment also experienced a return to pre-Covid-19 volumes sold, resulting in an operating profit of almost R80-million, compared with R2.8-million in the prior comparable six months.
This segment supplies aggregates of various sizes and technical specifications to large-scale civil engineering and infrastructure projects, as well as provides contract crushing, drilling and blasting services. Van Heerden states this improvement in volumes was mainly a result of normalisation to 2019 levels, rather than a result of a rise in construction activity.
He concludes that all of the company’s operating units are positioned to deliver outstanding service to the group’s customers, while acting as an efficient hedge against volatile local business conditions.