JSE-listed construction materials and industrial minerals supplier Afrimat is intensify ing its focus on further geographical expansion and opportunities in Africa.

“Afrimat constantly considers areas where there will be strong demand for its products, with a dedicated business development team continuing to successfully identify and pursue these opportunities in the existing markets, as well as in anticipated new high-growth areas in Southern Africa,” Afrimat CEO Andries van Heerden tells Mining Weekly.

These considerations are in addition to the company having obtained mining licences in Mpumalanga and having started the expansion of its Mozambique quarry operation – which became operational at the beginning of the year – over the past 12 months.

Van Heerden notes the company is satisfied with the production results of its Mozambique quarry to date, but acknowledges that the operation remains a “work-in-progress”.

He reiterates that Afrimat believed that the market in Mpumalanga and Mozambique was underserved, which the company saw as an opportunity to widen its regional offering and extract value in the market.

The company’s new business development remains a key component of the group’s growth strategy, Van Heerden emphasises, adding that Afrimat hopes to create more capacity in Mozambique, particularly in the far north of the country, where it continues to see substantial opportunity.

Afrimat is establishing quarries in Pemba and Cuamba, while another quarry is planned for the town of Palma, according to the company’s website. These operations aim to supply the “rapidly developing Mozambique region with high-quality aggregate products for civil and mining projects, as well as drilling and blasting services”, according to the source.

These quarries are also intended to serve small private- sector contracts and major infrastructure projects, such as the Tete–Nacala railway project and the Palma liquid-to-natural-gas project.

Van Heerden notes that, for the past five years, Afrimat has been growing at an average of 26% a year –“a respectable performance” – and that its share price has increased by more than 450%, which, he says, highlights the company’s strong financial stability.

Afrimat reported at its results presentation, held last month in Johannesburg and Cape Town, that its revenue for the year increased by 5.1% to R1.99-billion, from R1.9-billion the previous year, while its headline earnings increased by 24.4%. This translated into headline earnings per share of 135.6c.

Further, margin improvements showed an increase from 12% to 13.7%, while cash from operating activities amounted to R261.6-million, up 7.3% on 2014. Net asset value per share increased to R6.56, an increase of 13.3%, Mining Weekly reported last month.

“By far the most significant contributor to Afrimat’s profit stream is the quarrying industry, which contributed 80.5% of the contribution from operations, at R220.3-million,” Van Heerden highlights, noting that the mining and aggregates segment generated satisfactory profits, with an excellent contribution from the clinker operations.

Other improvements included the contribution from the traditional aggregates businesses, particularly those in KwaZulu-Natal and the Western Cape. Despite incurring higher mining and maintenance costs in 2014 to ensure long-term compliance with Department of Mineral Resources requirements and to gear the business for growth, the KwaZulu-Natal operations improved their contribution during the past year, according to Afrimat’s results statement.

Meanwhile, the company’s industrial mineral operations performed well, with resources group Infrasors’s turnaround progressing as planned, and openpit metallurgical dolomite quarry Glen Douglas, Afrimat’s largest quarry, in the south of Johannesburg, delivering another solid performance, Van Heerden says.

Afrimat’s acquisition of Infrasors remains a key focus, he adds, noting that, while the first phase that entailed stabilising the business to return it to profitability has been completed, Afrimat is now driving the Infrasors focus on entering additional markets.

Afrimat first acquired 50.7% of Infrasors’ gross shares in issue in February 2013 and acquired an additional 28.9% during the 2014 financial year, thereby increasing the company’s shareholding to 79.6%. In the 2015 financial year, Afrimat increased its holding to 91.3%.

Another core company focus underlined at Afrimat’s results presentation is product value addition and investigating the calcination of products such as dolomite and limestone.

This entails burning or combusting the product, driving off carbon dioxide and creating a product that is a reactive flux material for the metallurgical industry, Van Heerden explains.

“There is a drive for higher- value products and better-quality aggregates as end-users are pursuing better quality and costs savings. This will drive revenue growth faster than volume growth,” he predicts.

Despite acknowledging the “dampening” effects of negative consumer and investor confidence in South Africa on the quarrying and mining and construction industry, Van Heerden cites government’s increased spend on road maintenance – the highest ever – and smaller infrastructure projects as supporting the industry.

“[O]ngoing construction projects, such as the Mall of Africa, in Gauteng, are drivers for the industry, creating a stable market for Afrimat’s products,” he says.

With only moderate market growth projected, Afrimat expects the current business climate to continue, Van Heerden says, highlighting that the group’s growth will remain driven by the effective execution of its proven strategy that has been successfully implemented over the past five years.

“However, I’m confident that the projects pipeline of Afrimat can sustain growth for the future,” he concludes.