Afrimat (AFT) – Ahead of the curve

Afrimat performed well in FY22, producing strong results from its Industrial Minerals and Bulk Commodities segments, while its Construction Materials segment disappointed and failed to better its FY20 results.

The weak growth in the Construction Materials segment is attributed to volumes below normalised levels and the decline in SANRAL work in Afrimat’s main materials hub, the Western Cape. We note the potential for future delays from SANRAL in Kwa-Zulu Natal, Afrimat’s second largest hub; however, we think there is growth to be achieved from the BW 5 renewable energy projects.

Industrial Minerals’ strong growth was off a low base but improved steadily over the pre-Covid FY20 base, c. 7.0% CAGR. This segment’s potential lies in the food scarcity trend. Through the purchase of Agri Lime and Glenover stockpiles (phosphates and vermiculite), we see potential for outperformance as AFT capitalises on the shortage of agricultural minerals in the market.

Although Bulk Commodities performed well, we think it could have done better. This was mainly due to delays caused by Transnet Freight Rail, however, which cost the division 14% in sales volumes. Its Jenkins and Nkomati mines shone in FY22 and provided growth in the segment as Demaneng revenue contracted. We expect a strong performance in FY23 from Jenkins and Nkomati as the contract volumes increase along with the higher negotiated prices.

Through continued expansion, Nkomati could outperform and manganese and rare earth minerals could make a large contribution in FY24, once fully operational.