CONSTRUCTION: Afrimat Leveraged For Good Growth
Recent Western Cape Business News
CAPE-TOWN-based materials supplier Afrimat posted solid growth for the year to February 2011, capitalising on more favourable economic conditions as well as product diversification to sustain the growth trajectory promised to investors. HEPS of 62.6 cents was generated off revenue of R996 million, up 16.6%, with all other key financial indicators similarly looking positive.
The JSE-listed group successfully exploited opportunities in previously untapped markets to drive growth and improve its risk profile. The acquisition post year-end of the Clinker Group, South Africa’s leading manufacturer of raw material clinker (used in concrete), has further advanced Afrimat’s product diversification.
CEO Andries van Heerden says the group’s performance is pleasing especially given a business environment that is still volatile, albeit improving. “Widening focus into new markets and expanding geographically has given Afrimat an advantage in the unpredictable market,” he says.
Key division – Mining & Aggregates – reflected the benefits of product diversification with access to the industrial minerals market through newcomer Glen Douglas boosting overall volumes. Van Heerden is satisfied with the performance at the Glen Douglas mine after optimisation strategies were put in place following its acquisition in 2011. The new mining fleet is now fully operational. “The extent and timing of the turnaround has exceeded our most optimistic expectations.”
He adds that traditional aggregates volumes were consistent year-on-year. Going forward he points out that in the Western Cape, Afrimat is finally showing signs of an upturn in the residential and commercial sectors which bodes well for the division’s future growth.
The Concrete Products and Readymix divisions both grew volumes with increased participation in government housing projects. However, Readymix remains under strain as a result of ongoing pricing pressure in the slowly recovering Western Cape.
Recent acquisition, the Clinker Group (acquired with effect from March 2012), recorded R35 million profit after tax for its last financial year prior to acquisition, which equates to a potential return for Afrimat in excess of 20% per annum. But van Heerden says the key benefit to the group of this acquisition is far more strategic: “Due to clinker’s distinct characteristics, which are difficult to substitute, it has proven resistant to market fluctuations and therefore provides a valuable hedge against the cyclicality associated with the aggregates industry.”
In addition the main operations are located near Vereeniging and Sasolburg and therefore close to the Glen Douglas mine, creating exciting opportunities for synergy. Van Heerden points out that not much capital outlay will be required to extract value as the existing processing and manufacturing plants are well maintained.
Looking ahead he says Afrimat will continue capitalising on government’s renewed commitment to infrastructure as well as on new markets for growth. He points out that the mobile nature of the group’s crushing fleet and its broad geographic capability position Afrimat to capitalise on all opportunities irrespective of location.
“We intend to prioritise raising volumes across the board, continually trimming costs and improving efficiencies, which includes targeting appropriate projects to absorb existing capacity,” van Heerden says.
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