Afrimat experienced difficult trading in the six months to August 31, but a gathering of pace of the turnaround of newly-acquired cement group Lafarge South Africa, rising production from the anthracite mine, and higher iron ore export prices should result in a better second half.
This was according to chief financial officer, Pieter de Wit, who was interviewed at the release of results that showed headline earnings a share falling markedly to 53 cents from 263.4 cents, and the net debt equity position increasing to 45.6% (February 2024: 1.4%) due to funding the Lafarge and Glenover transactions.
The interim dividend of 10 cents a share was well down on 40 cents at the same time last year.
Afrimat CEO Andries van Heerden said there had been a solid performance from the aggregate quarries and ash business leading to an overall improvement in the results of the Construction Materials (Aggregates) segment.
The mid-tier mining and materials company providing bulk commodities, construction materials, industrial minerals and future materials and metals, increased revenue by 44.3% to R4.1 billion, including the Lafarge business.
Operating profit, however, fell by 45.2% from R534.1 million to R292.7m.
The lower operating profit was mainly due to losses in the neglected cement division of Lafarge and much reduced iron ore sales because of the unexpected freeze of two furnaces at ArcelorMittal, the volumes for which had since resumed to more normal levels, said De Wit.
In addition, iron ore export prices weakened through the interim period, the rand strengthened and there were continued limitations on the export rail line. Iron ore prices had recovered somewhat since then, said De Wit.
This was all notwithstanding a good performance from the group's quarries and the industrial minerals division.
“The group remains committed to ensuring strong cash generation to settle the additional debt as quickly as possible,” van Heerden said.
De Witt said gearing was slightly above their target, but there were plans to reduce this reasonably quickly.
The Construction Materials segment (excluding cement) delivered a solid performance, increasing operating profit 39,4% to R217.6m.
Van Heerden said this was largely due to the successful integration of the Lafarge quarries, fly-ash business, and ready mix batching plants, as well as volume growth and cost-saving initiatives.
The cement business incurred losses of R146.2m during the interim period, which he said were primarily due to known reliability issues at the cement factory, resulting in excessive maintenance costs and limited production.
A dedicated project management team was assembled under the leadership of De Witt to ensure a swift turnaround. The two kilns were now in production.
Moving on to the Industrial Minerals businesses, van Heerden said this segment increased operating profit by 54.9% to R49.5m.
The suspension of load shedding was positive for both the segment and its customers and starting from a low baseline, the volume increase was supplemented through marketing initiatives into new markets, he said.
The Bulk Commodities segment, consisting of the iron ore mines and an anthracite mine, contributed 32.9% to operating profit. The iron ore mines’ operating profit fell by 63.6% to R148.1m from R407m.
International iron ore exports were adversely impacted by lower US Dollar prices, increased shipping costs, and the strengthening of the rand. Challenges on the rail line resulted in rail shipment volumes decreasing by 9%, with volumes for the period being 349 084 tonnes, or 19.8% below allocated volumes.
The anthracite mine’s revenue increased by 91.3% to R471.6m. Operating profit came to R34.7m compared to an operating loss of R21.1m in the comparative period.
Van Heerden said good progress was made in overcoming obstacles that hampered production in the past at the mine. “Thirty-eight houses were relocated, 91 graves were moved, and an Eskom power line was moved to allow for more fluid open-pit mining,” he said.
The Future Materials and Metals segment, which with its phosphate and rare earth elements aims to align Afrimat to decarbonisation trends, produced revenue of R38.9m with start-up losses of R21.1m.
The Glenover project focuses on processing high-grade phosphate and single superphosphate (SSP). With the SSP plant commissioned, sales volumes for fertiliser were slowly ramping up to achieve the planned volumes by 2025.
BUSINESS REPORT