Jan 23, 2013:
BELLVILLE-based materials supplier, Afrimat, significantly grew revenue and headline earnings for the six months to August 2012, with all other key financial indicators looking similarly positive.
The group’s strategy to achieve growth from diversification is proving continually successful with the recent acquisition of the Clinker Group, a leading manufacturer of raw material clinker, having helped boost performance for the period.
Revenue increased 32.5% to R671.3m while headline earnings rose 21.7%, translating to 35 cents a share (HEPS) up 17.4% on the comparative period.
CEO Andries van Heerden says the group’s interim results are satisfactory in light of still challenging conditions in the building and construction sector. The key division - Mining & Aggregates – remained the major driver of growth. “The division is showing the fruits of our diversification strategy as we leverage the combined strengths of Afrimat and the Clinker Group to open new revenue streams and improve profitability,” he says.
The acquisition of the Clinker Group became unconditional in March 2012, with Afrimat acquiring 100% of the shares of SA Block and its 100% owned subsidiary Clinker Supplies (together the Clinker Group). Van Heerden explains the strategic impact for the group: “Clinker’s unique properties are difficult to replicate, making the product more resistant to market fluctuations and vagaries and offering a competitive advantage. In addition, the proximity of the Clinker group’s main operations to the Glen Douglas mine present opportunities to capitalise on the synergy for growth.”
Relative newcomer Glen Douglas reflected its own strategic advancements with the upgrading of equipment making satisfactory progress during the period. “We have substantially improved throughput at Glen Douglas with the acquisition of a new mining fleet which is now fully operational,” says Van Heerden.
Strike action in KwaZulu-Natal affected all three divisions, leading to a decline in volumes in the region. Readymix did however, benefit from a slight uptick in the Western Cape while Concrete Products derived good growth from the recently acquired SA Block (part of the Clinker Group acquisition).
Looking ahead van Heerden is cautious of a slow business environment recovery. He says the group will maintain focus on increasing volumes, primarily though ongoing product diversification into attractive markets such as industrial minerals and raw materials like clinker. At the same time the group will expend much effort on reducing costs and improving efficiencies to bolster profitability. Van Heerden adds: “Our processing plants are fully commissioned and wholly capable meeting market needs. In addition the mobile nature of the group’s crushing fleet, and its considerable geographic capability, position Afrimat to take advantage of opportunities irrespective of location.”
With the renewable energy sector showing signs of considerable growth, opportunity for both construction companies and materials suppliers makes this an exciting new niche for Afrimat. Van Heerden notes that the bulk of renewable energy activity is likely to be centred on wind farms, with a number of solar power projects also due to come on stream. “We anticipate that this new avenue is likely to be a big driver of construction activity in years to come,” he concludes.