AFRIMAT: Commodities benefited from favourable iron ore pricing
Afrimat’s all three segments, namely Construction Materials, Industrial Minerals and Bulk Commodities experienced strong growth compared to the previous corresponding period, considering the effects of the hard-lockdown levels imposed to limit the spread of Covid-19 in the previous period.
The Bulk Commodities segment benefited from favourable iron ore pricing and from the new mines, namely Jenkins (iron ore sold in the local market) and Nkomati (anthracite also sold in the local market), which contributed positively to the results towards the end of the reporting period. Nkomati was, however, loss making for the first five months of the reporting period.
All operating units are strategically positioned to deliver outstanding service to the Group’s customers, whilst acting as an efficient hedge against volatile local business conditions. The product range is diversified and is made up of Construction Materials consisting of aggregates, concrete-based products and contracting operations, Industrial Minerals consisting of limestone, dolomite and industrial sand, and Bulk Commodities consisting of iron ore and anthracite.
The Bulk Commodities segment, consisting of the Demaneng and Jenkins iron ore mines and the Nkomati anthracite mine, delivered an excellent contribution to the Group results, delivering growth of 39,3% in operating profit of R453,7 million, compared to R325,8 million in the prior period. The excellent performance was largely due to favourable iron ore pricing during the reporting period.
With Jenkins iron ore mine successfully coming into production, the ramp up is in accordance with strategic plans and product is sold into the local market through a defined price contract.
FINANCIAL RESULTS
Revenue increased by 55,4% from R1,6 billion to R2,4 billion culminating into an increase in operating profit of 65,0% from R353,1 million to R582,8 million. An improvement in the operating profit margin from 22,7% to 24,1% was achieved.
The Nkomati anthracite mine, which turned from realising start-up losses to also contributing positively to the segment’s result in August, produces a high quality product sold into the local market, as a replacement for imported anthracite.
Industrial Minerals businesses experienced a return to pre-Covid-19 volumes across all regions, delivering an increase in operating profit of 108,0% from R24,6 million to R51,1 million.
Construction Materials also experienced a return to pre-Covid-19 volumes, resulting in a significant improvement in operating profit being recorded from R2,8 million to R79,5 million in the current period. This is primarily a result of general volumes recuperating to 2019 levels, rather than a result of a rise in construction activity.
PROSPECTS
The Group is well positioned to capitalise on strategic initiatives and future opportunities. The Group’s future growth will be driven by the successful execution of its proven strategy, recent acquisitions and a wider product offering to the market. Many exciting opportunities are being investigated.
Afrimat continues to focus on sustainable diversification in all three segments. In the Bulk Commodity segment, the focus is to ramp-up the production of the Jenkins iron ore mine to the planned annual volumes of 1,25 million tons of iron ore sales into the local market. The Group has Driehoekspan and Doornpan iron ore assets to bring online once Demaneng volumes begin to reduce. This should be within the next three to four years. The Nkomati anthracite mine will add further commodity diversification as volumes ramp up further in the coming six-months.
Within the Industrial Minerals and Construction Materials segments, market development as well as product development continues to take place in accordance with customers needs.
Operational efficiency initiatives aimed at expanding volumes, reducing costs and developing the required skill levels across all employees, remains a key focus in all operations.
