Industrial minerals and construction materials group Afrimat has recorded a good overall performance for the year ended February 28, and achieved positive results for the period owing to its diversification strategy, Afrimat group CEO Andries van Heerden said in a statement on Thursday.
The group’s entry into bulk commodities two years ago was highlighted as having been well-timed, given that it contributed considerably to its sustained earnings growth in the year under review.
Further, the group pointed out that it has, as a result of its diversification strategy, maintained a compound average growth rate of almost 20% a year for the past decade.
Meanwhile, in the financial year under review, healthy international iron-ore prices turned the recently acquired Demaneng iron-ore mine in the Northern Cape into a notable performer.
The performance of Afrimat’s industrial minerals segment for the second half of the year under review was also said to have been healthy; however, a slow first half resulted in the segment’s full-year performance being marginally weaker than that of the previous year.
Van Heerden indicated that political uncertainty and the economic slowdown experienced during the last quarter of the previous financial year had continued during the period under review, with the biggest impact felt by Afrimat’s construction materials businesses.
“Nevertheless, our entrepreneurial approach, the diversified product range, our strategic positions and excellent service delivery all combined to ensure that Afrimat was able to weather the storm and, to a large extent, this has insulated us from the prevailing conditions, for which we are thankful.”
The company’s bulk commodities segment, consisting of the Demaneng iron-ore mine, contributed positively to its results, thereby offsetting the lower performance from construction materials.
Speaking at a results presentation, in Johannesburg, Van Heerden indicated that the company strategy entailed seeking three elements to engender a competitive advantage, namely, a good geographic location, quality products or a structural cost advantage.
Afrimat will continue to focus on its strategy to ensure that it remains a profitable and sustainable entity into the future, with new business development remaining an integral element of the growth strategy.
“Our business development team continues to successfully identity and pursue opportunities in existing markets, as well as in anticipated new high-growth areas in Southern Africa.”
Afrimat CFO Pieter de Wit, meanwhile, said the company had recorded exceptional cash generation, owing to its diversification strategy.
Group revenue for the year under review increased by 24.6% year-on-year to R3-billion – a new record for the company.
Headline earnings a share grew by 29.6% to 234.1c.
Industrial mineral producing operations across all regions, as well as the iron-ore business, were the main contributors to the positive results.
Net cash from operating activities increased by 46.4% to R410.5-million, which resulted in a decrease in the net debt: equity ratio from 35.5% in the prior year to 23.8% in the year under review.
A final dividend 62c a share was declared.
New business development also remains a key component of the group’s growth strategy.
Afrimat announced in April that it had made a nonbinding indicative offer to buy the entire issued share capital of Universal Coal for a maximum purchase price of A$0.40 for each Universal share held.
The acquisition will benefit Afrimat by allowing it to diversify into another commodity, while also being cash generative.
Moreover, Van Heerden indicated that South Africa was still reliant on coal for secure electricity supply, with renewable energy not having the required capacity.
Therefore, the company indicated there was demand for coal and that it hoped to contribute to electricity generation in the country but positively, in a sustainable, clean manner.