JSE-listed industrial minerals and construction materials producer Afrimat, in a pre-close operational update for its financial year ending on February 28, said trading conditions were expected to remain difficult until fair trade protections across critical industries in South Africa were adequately addressed.

Afrimat is feeling the impact of pedestrian economic growth and customers who are contending with cheap imports. To counter this, Afrimat is assessing projects where international or local partners and technology can help advance timelines and unlock value for shareholders.

During the first half of the financial year, significant operational improvements were achieved at the Nkomati anthracite mine. Owing to the shutdown of the ferrochrome smelters in South Africa in August 2025, it was expected that volumes would decrease in the second half of the year, which was the case.

During November and December 2025, and January, the mine was in full shutdown, starting up again in February, with a skeleton staff in place, in anticipation of at least two ferrochrome smelters reopening.

A restart date for the smelters has not been confirmed.

Overall, local volume sales are expected to settle at about half of the volumes reached in its prior financial year, when local volume sales reached 277 151 t.

Further, Afrimat's Industrial Mineral segment, although a very small contributor to the group, was also affected by the shutdown of various smelters in South Africa, the company reported on February 17.

In terms of operational performance, the Construction Materials and Bulk Commodities segments will be the most meaningful contributors to revenue and profitability for the financial year to end February.

The company's debt-to-equity ratio remains at the same levels as previously reported, and the sale of various noncore assets and businesses should generate cash to begin reducing debt in the new financial year. Debt is being refinanced using a longer-term facility to more accurately reflect the nature of the debt.

“This year marks Afrimat's twentieth anniversary, and it has had to contend with treacherous local conditions in recent years. A huge amount of time has been invested in each segment to ensure it is positioned to navigate the new realities of South Africa,” it said.

The group's operational results should change substantially once the ferrochrome smelters reopen, which will be further supported by the reallocation of the international iron-ore rail line scheduled to take place in 2027, enabled through excellent engagement with State-owned Transnet, it reported.

However, Afrimat's teams had delivered meaningful progress, even in a constrained local economic landscape, it said.

Notable accomplishments during the year include good performance in the aggregates business, the successful sale of noncore brick and block and ready-mix plants, and obtaining financial approval from the preferred bidder's financiers to acquire Afrimat's assets identified for the divestiture as mandated by the Competition Commission.

Further, losses in cement have moderated, local iron-ore sales volumes were maintained in the second half and international iron-ore sales were satisfactory.

For its aggregates business, year-on-year revenue growth was driven by a wider presence across the country and continued orders from road builders, construction, ballast and some provincial infrastructure maintenance, it said.

Significant progress was made in the second half of the financial year, with 80% of the projects required to place the aggregates business in a stronger and more competitive position completed. This included maintenance, repairs and operational improvements.

Its focus currently was on addressing those quarries that were delivering suboptimal margins, with initiatives under way to bring their performance in line with the overall aggregates margin, the company noted.

To improve efficiency in some of the larger quarries, rental plant was replaced with Afrimat mobile plant and machinery.

In its cement and extenders business, clinker production for the year is expected to be 20% higher than last year. Overall equipment efficiency (OEE) is improving, with some work still to do and further gains expected.

Additionally, to prevent a recurrence of disruptions caused by wet limestone, which led to kiln instability in 2025, limestone domes at the Lichtenburg plant have been successfully filled before the start of the rain season.

The Tswana Lime Mine operations were in good condition and should deliver significant additional cost savings. The Randfontein Grinding Plant operated at an acceptable, consistent level throughout the year and has been a key enabler of stable Buildcrete and Durabuild production.

Cement sales volumes were expected to show a good year-on-year increase, but the segment remained lossmaking, although losses narrowed in the second half of the year, Afrimat said.

Capital expenditure for cement should settle at about R120-million, thereby showing good progress with equipment upgrades to ensure higher OEEs going forward.

The margin for Afrimat’s Construction Materials division, which includes its aggregates and cement businesses, was expected to improve slightly for its 2026 financial year. However, lower margins from the recently sold noncore businesses would impact the group's overall margin, Afrimat said.

The group sold noncore brick and block and ready-mix businesses, as well as noncore properties.

In some instances, cash proceeds from noncore asset sales were expected only after the 2026 financial year-end owing to approvals required under the Mineral and Petroleum Resources Development Act, it added.

Meanwhile, Afrimat's Bulk Commodities segment, which includes its iron-ore, anthracite, rare earths and industrial minerals, has been affected by several structural factors in the South African economy.

An improvement in iron-ore volumes sold was expected compared with the previous year, given an increase in offtake from steel producer ArcelorMittal South Africa (AMSA), up from 889 556 t in its 2025 financial year. The group's local iron-ore sales are to AMSA's Vanderbijlpark Flats business.

Afrimat remains in ongoing discussions with AMSA and eagerly awaits the outcome of discussions between the steelmaker’s parent the ArcelorMittal group, the Industrial Development Corporation and the Department of Trade, Industry and Competition about the ownership of AMSA’s assets.

The outcome of these discussions was fundamental to Afrimat and critical for South Africa to sustain industrialisation instead of having another industry collapse, Afrimat stated.

“It is time for our political leadership to make sound economic decisions, collaborate more actively with the private sector and demonstrate performance and tangible outcomes supported by strong economic objectives,” the company said.

Further, for its Glenover project, Afrimat reported that rare earth processing was highly complex and strategically important. Its technical team had performed extensive testing both locally and internationally to assess different processing methods to achieve the best recovery.

Afrimat had chosen project strength over speed and had invested the time needed to position a globally-competitive project. Discussions had begun with reputable international players to partner with Afrimat on this project, both technically and financially, it noted.

Meanwhile, its international businesses were performing satisfactorily, with international iron-ore sales expected to be on par with its 2025 financial year volumes of 726 436 t.

However, international sales volumes for iron-ore were constrained owing to shipment capacity being 16% down on the committed rail allocation of 870 000 t/y.

Additionally, its anthracite from stockpiles was sold in the international market, and these export volumes increased substantially from its 2025 financial year of 74 244 t.

“This increase was insufficient to offset the loss in local volumes. Total anthracite volumes for the financial year to end February 2026 will be approximately 3% less than in the prior financial year.”

In terms of prospects for the coming financial year, Afrimat had acquired construction materials company Lafarge to enhance its access to quarries and aggregates, and this strategic move was beginning to show excellent results, it reported.

“With numerous management interventions to improve the business, as well as increased orders, the coming financial year is expected to provide a clearer picture of expectations, with Afrimat having returned to its original quarrying roots,“ it said.

Further, Afrimat viewed the stagnant cement market as an opportunity to gain market share. With above-consumer price inflation price increases negotiated and confirmed, the 2027 financial year should deliver revenue sufficient to cover cost increases, excluding potential volume growth, it noted.

Afrimat continued to drive international anthracite sales, although a shipment scheduled for loading in February had been delayed to later in the year, while strong marketing efforts continued, it said.

Afrimat will update the market in April, once management has greater certainty about the company's financial position.