Andries van Heerden. Picture: MARTIN RHODES
Andries van Heerden. Picture: MARTIN RHODES

Open-pit mining group Afrimat’s diversification strategy paid off in the year ended-February as its bulk commodities business countered poor performance from its other segments.

Higher iron ore prices from the recently-acquired Demaneng mine in the Northern Cape boosted the firm’s performance, despite the lacklustre performance of the construction business and mixed showing of the industrial minerals operations.

Afrimat CEO Andries van Heerden on Thursday said the bulk commodities business was the star performer in the year, while industrial minerals had a slow first half.

“We all know what the situation is with construction right now. We saw a decline in the construction materials’ profitability. But (construction materials) is still a significant part of our business. It accounts for almost half of our profits. Given the really tough market out there, I am very happy with what we achieved,” Van Heerden said.

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He said Afrimat, a supplier of materials sourced from open-pit mines and quarries, had no plans to restructure the construction business given the poor state of the construction sector.

“The business is fit and healthy. We need to focus on execution and to serve customers well. We must just ensure that we secure work at appropriate margins,” he said. 

Anthony Clark, an independent analyst from Small Talk Daily, said iron ore continued to ride high and Afrimat should continue to benefit in its new reporting period as the weak domestic construction market awaited government policy and infrastructure spend from the new President Cyril Ramaphosa administration.

Clark said Demaneng, which was acquired and rehabilitated for about R400m, might turn out to be the best deal that Van Heerden has ever done.

“Well that is until the Universal Coal R2bn acquisition is finalised,” he said, referring to Afrimat’s bid for Universal Coal.

Afrimat has made a non-binding offer to purchase the Australia-listed Universal Coal for 40 Australian cents per Universal Coal share.

Clark said, provided the Universal Coal deal went ahead, Afrimat’s financial results for the 2020 financial year would mainly be about iron ore and coal.

Van Heerden said to finance the transaction, the company would consider a rights issue. “But we have not decided on the exact mechanism,” he said.

“If Universal Coal is a good a deal as the past ones undertaken by Afrimat, the rights issue should be plain sailing,” Clark said.

Afrimat’s full-year headline earnings per share increased by 29.6% to 234.1c per share, while revenue increased by 24.6% to R3bn.

Afrimat increased final dividend by 47.6% to 62c per share.