Multi-commodity, midtier mining company and construction materials provider Afrimat has made several key improvements, and the results of these interventions are now becoming tangible, as evidenced in the group’s results for the six months ended August 31.

This includes group revenue increasing by 29.9% from R4.1-billion to R5.3-billion, supported by the integration of the Lafarge businesses and overall volume and sales increases from iron-ore and cement.

“The focus for the period under review was on meticulous operational execution to ensure that Afrimat unlocks the full potential of its diversified asset base. The troubled Lafarge South Africa assets that we recently acquired have now been fully integrated into our structures and good progress has been made with the turnaround of these businesses,” group CEO Andries van Heerden explains.

“The first quarter reflected a continuation of the prior year’s challenges; however, by the second quarter, the benefits of the improvements we implemented began to gain momentum. A significant increase in local iron-ore sales, coupled with satisfactory international sales, resulted in an overall strong performance from the iron-ore component of the group,” he adds.

Operating profit increased by 29.8% to R379.8-million from the August 2024 (restated) figure of R292.6-million, with an operating profit margin of 7.1%.

Cash generated from operations improved considerably to R357.7-million compared with cash used in operations of R131.4-million in the previous comparable period. The increase was supported by increased sales volumes in cement and iron-ore.

An interim gross dividend of 20c apiece for the period was declared on October 22.

Finance costs increased to R148.4-million, but the group says it is seeking to ensure that debt is settled quickly, including the sale of noncore and unprofitable assets.

The net debt-to-equity position of the group is 52.5%, representing a marginal increase compared with the position as at February.

This increase is attributed to further investment in working capital owing to increased iron-ore sales.

The sale of assets process, in accordance with the Competition Commission’s requirements, is now at an advanced stage.

Afrimat has also sold operations that it felt were no longer core to its Construction Materials businesses.

Efforts to integrate the Lafarge acquisition, fix previously neglected Lafarge assets, turn the Nkomati business around and ensure a high-quality iron-ore product resulted in profit after tax improving by 78.9% to R173.5-million from the August 2024 restated figure of R96.9-million.

This translated into improved earnings and headline earnings per share of 102.7c and 101.9c, respectively, compared with the August 2024 restated figures of 58.3c and 53c, respectively.

OPERATIONAL REVIEW
The aggregate and ash components of the Construction Materials segment were affected by excessive rainfall in the northern regions of South Africa during the first quarter, which limited orders of aggregates. During the second quarter, sales volumes improved, with operational efficiency at the former Lafarge quarries leading to previously lost market share being regained, and momentum expected to continue.

Revenue of the aggregates and fly-ash division grew by 9.1% to R1.9-billion while the operating profit grew to R321.2-million, mainly owing to the final integration and investment into the former Lafarge quarries.

Revenue for the cement business rose by 118.8% to R873.7-million, but it was loss-making at the operating profit level.

Plant reliability showed a considerable improvement towards the end of the reporting period, resulting in fewer production disruptions.

The Bulk Commodities segment’s revenue and operating profit increased by 53.6% and 56.8%, respectively, from the previous period.

The iron-ore mines’ revenue increased by 77.9% to R1.7-billion.

A considerable increase in local iron-ore sales volumes was recorded, with volumes increasing to 830 662 t from 339 648 t.

Total international iron-ore export volumes increased to 396 384 t. The expectation is that the full-year volumes will be similar to the previous year, about 17% below Afrimat’s yearly allocation of 870 000 t/y, primarily owing to logistics availability on the Saldanha export rail line as a result of a maintenance shutdown of the line during the second half.

Operational improvements at Nkomati anthracite mine were successfully implemented, and with a full environmental-impact assessment in place, the mine processed 100 000 t in July.

An assessment of underground viability led to the mothballing of the underground mining operation.

Owing to decreased demand from ferrochrome smelters during the period, volumes amounted to 136 216 t.

The Mozambique border has reopened, and two shipments of anthracite were exported, totalling 61 861 t as compared to the 41 568 t in the previous period, with additional shipments expected for the remainder of the financial year.

The Industrial Minerals segment, albeit a small part of the group, was also impacted by the shutdown of the ferrochrome smelters and the closure of ArcelorMittal South Africa’s (AMSA's) Newcastle steelworks.

Revenue declined by 16.8% to R270.6-million from R325.1-million, and operating profit dropped to R22.5-million from R68.6-million in the previous period.

Progress was made in the Future Materials and Metals segment, with testwork to unlock the full potential of this reserve.

Revenue from phosphate product sales increased to R53.7-million from R38.9-million, but as the business is still ramping up, it incurred an operating loss of R24.8-million.

OUTLOOK
The performance of the cement plant is expected to improve as reliability and throughput increase.

The assets acquired in the Lafarge transaction are indicated to be either profitable or demonstrating strong momentum.

Post the interim period, the acquired Lafarge quarries are further increasing sales by regaining market share and developing new markets supported by a strong national presence.

“Afrimat is well-positioned to benefit from road and rail maintenance, private building projects, provincial maintenance, infrastructure projects and large-scale infrastructure and building initiatives across our borders,” Van Heerden highlights.

Afrimat expects domestic iron-ore sales to be slightly lower in the second half of the financial year compared to the first half, owing to the closure of AMSA’s Newcastle operation, yet overall better than the previous year.

International iron-ore sales are projected to remain at similar levels to the previous year. The recent rise in iron-ore prices is noted as a positive development.

Owing to the possibility of ferrochrome smelter closures in South Africa, management is currently evaluating viable options for the Nkomati anthracite mine.

The group is encouraged that government and the sector are in discussions to secure sustainable electricity tariffs, thus maintaining competitiveness.

Afrimat is hopeful that no further erosion of industrialisation will occur in South Africa.