Afrimat experienced a tough 1H25 and delivered underwhelming results despite double-digit revenue growth. Although construction market conditions were much better than in recent years, the strong performances from the materials business could not outweigh the difficulties in the iron ore division. Furthermore, with the Lafarge assets in a far greater state of disrepair than expected, Afrimat was not able to deliver growth in line with expectations.
We are positive about the future of Lafarge within the group and expect an improved contribution from FY26 as operations are restored and the cement business gains market share. The quality and location of the Lafarge assets could provide Afrimat with a competitive advantage once infrastructure spending increases in the country.
We are concerned about the Bulk Commodities businesses, though. Transnet’s underperformance continues to weigh on Afrimat’s local and international iron ore operations. The setbacks at Nkomati have led to production delays and higher costs. Meanwhile, concerns about AMSA as a going concern and the effect this could have on Afrimat’s earnings is eye-opening.
Despite our concerns, we believe that in current market conditions, Afrimat should be able to recover the iron ore business over the next 12 months, while the anthracite business could remain under pressure. The future of the Construction Materials business looks bright and as Sanral and Transnet start awarding contracts, we could see the business outperforming. Furthermore, if Afrimat receives the 2mtpa rail allocation in 2027, iron ore sales volumes could double from FY28 and would provide a sizable boost to earnings.