AFRIMAT: Diversification Cements Afrimat as Mining and Materials Leader

With more than half a century of experience driving it, Afrimat has built up a vast geographical footprint already covering swathes of urban and rural southern Africa, and growing quickly. An integrated product offering is today distributed across the Western Cape, Eastern Cape, KwaZulu-Natal, Free State, Gauteng, Limpopo, Mpumalanga and the Northern Cape.

It is a geographical flexibility which in turn translates to project scale, with the group consummately servicing major infrastructure and construction undertakings for both public sector – and government-owned enterprises, through to small private sector contracts. “This diverse client base acts as a risk hedge and geographically diversifies Afrimat’s exposure to the infrastructure-related spend in its target regions,” the company furthers.

A huge variety of aggregates and concrete-based products is on offer through its Construction Materials division, with everything from ready-mix concrete and building lime to clinker supplies and sand available. The company’s Industrial Minerals arm supplies the steel industry with metallurgical dolomite as well as furnishing the construction industry with a variety of aggregate products, while agricultural lime is delivered through its Vredendal, Langvlei, Marble Hall and Glen Douglas mines.

Established in 2016, Afrimat’s Commodities division focuses on supplying quality iron ore and manganese to local and international markets. Afrimat Mining Services, meanwhile, specialises in competences from mine planning, bulk drilling and blasting to beneficiation of products, management and logistics.

ROBUST RESULTS

“We aim to be globally respected for excellence in unlocking and enhancing the earth’s mineral potential to build a better world,” Afrimat proclaims. “We inspire growth by consistently delivering solutions through the empowerment of our people, and our customers, and everything we do is within an atmosphere of joy and positivity.”

Such lofty aims and clear methodology have combined to result in revenues up 26.7% on 2021’s figures, with full year results ending February 2022 posting R4.7 billion compared to the R3.7 billion of the previous 12 months. In an all-encompassing success story operating profit margins of 23.7% joined headline earnings per share (HEPS)of 542.9 cents, up 22.9%, with a final dividend per share of 146 cents and return on net operating assets of 33%.

Andries van Heerden, Group CEO, attributed the remarkable achievements and strong operating cash flows to myriad factors, including favourable iron ore prices and the return to pre-Covid-19 volumes in both of the Construction Materials and Industrial Minerals divisions. The Bulk Commodities segment, consisting of the Demaneng and recently established Jenkins iron ore mines, benefited from the efficient and timely turnaround of Afrimat’s Nkomati Anthracite mine and favourable iron ore pricing, contributing an overall 74% to the Group’s operating profit.

“This excellent performance was further enhanced by increased volumes from the Jenkins mine,” van Heerden clarified, as additional volumes contributed positively to the second half of the financial year. “Operationally, we’re very proud of what the guys did there. What they did in a very short space of time and in how they are continuously improving that business by bringing down costs – it’s quite a significant improvement that they have achieved over the last year.

“Nkomati, which produces a high-quality product for the local market, was loss-making for the first five months of the reporting period, but turned into a profitable business from August 2021 onwards, recovering the biggest part of the losses of the first five months.”

Its people have always been at the heart of both Afrimat’s considerations and its accomplishments, whereby a famously consistently low staff turnover has resulted in a deep skills pool on which to draw, and van Heerden was equally anxious to recognise their role in a financial year which saw excellent labour relations maintained. “The Group is committed to creating and sustaining harmonious relationships in the workplace and to addressing issues proactively,” he explained.

“We continue to prioritise staff development, training and education on the human capital agenda. With training and development being a critical part of the Group, a total of 10,000 training days for employees were undertaken during the year, supplemented by the issuance of 56 staff bursaries.”

DIVERSIFIED OFFERING

Afrimat is in no way ambiguous about what will enable all of its historic success and innovation to continue. “Diversification is the key to growth for Afrimat,” the company insists, “underpinned by the entrepreneurial flair that is embedded in the Group’s DNA.” As 2021 came to a close Afrimat announced a landmark acquisition, this time in the phosphate and rare earth minerals space, in the form of Glenover Phosphate, located 90km northwest of Thabazimbi in the Limpopo Province.

“Current reserves of phosphate, vermiculite and rare earth elements provide for a resource life of more than 20 years,” van Heerden divulged of the new asset. “Afrimat will obtain the inventory deposits of historically-mined resources and extend the life of project by acquiring the remaining in situ resource.

“The application of these minerals is vast,” he added of an acquisition set to further expand the Group’s offerings in line with its diversification strategy. “Phosphates are used in fertilisers and rare earth elements are used in many applications, one of which is for magnets in electric motors; an international trend towards electric vehicles is expected to be a big demand driver for this application in future. Vermiculite is used in the construction of fire-retardant partitioning boards, and in horticulture as a growth medium and other industrial applications.”

Importantly, van Heerden addended, Glenover will also expand Afrimat’s product portfolio beyond the ferrous metals value chain in the form of a multi-commodity product that addresses fundamental needs and trends, including those in the agriculture and food industry, as well as in new technology applications. “This transaction provides the Group with a new platform for growth while at the same time reducing cyclicality. Phosphate, vermiculite and rare earth minerals will also widen our international geographic market footprint.”

Such moves are perfectly aligned with what van Heerden clearly believe to be an excellent positioning to capitalise on strategic initiatives and future opportunities. “Our future growth will continue to be driven by the successful execution of our proven strategy, recent acquisitions and a wider product offering to the market, with several exciting opportunities being investigated,” he shares.

“Of course, operational efficiency initiatives aimed at expanding volumes, reducing costs and developing the required skill levels across all employees, remain a key focus in all operations. Most important of all perhaps though is our desire to uphold ESG fundamentals and consciously work on all stakeholder relationships. We do all this daily because it is entrenched in our culture to ensure returns that support long-term sustainability.”