Afrimat (AFT) – Ramping up

Afrimat faced challenging conditions in FY23, from Transnet Freight Rail setbacks to community unrest and a construction market under pressure. Thanks to its diversification strategy, it was able to produce positive revenue growth during the period. The Construction Materials and Industrial Minerals segments struggled to improve volumes over the past year and were impacted by increased load-shedding and high fuel costs. The construction market remains flat, but management expects a strong improvement in 12-18 months as consulting engineers are extremely busy assessing contracts, which could result in a recovery in FY25.

The Bulk Commodities segment did not perform as well as expected. Demaneng underperformed and Nkomati faced headwinds that constrained growth in 2H23. Afrimat has, however, experienced improved efficiency along the iron-ore corridor and, along with the high demand for Jenkins iron ore, the iron ore business is expected to perform well.

Nkomati recently completed a large expansion, opening two pits and an underground mine, as well as a plant upgrade. As a result, run of mine (ROM) has increased by c. 30 000 tonnes per month and, along with the 6.5% increase in the contract price, the anthracite mine is expected to have a stellar year. If Afrimat can overcome infrastructure constraints and hit coal in the underground mine, the business could outperform.

Afrimat’s balance sheet is net cash positive and the majority of mine capex has been spent. It is now looking to expand. Afrimat is planning to release a revolutionary product within the next 18 months that could disrupt the construction materials market. It aims to expand its Construction Materials operations in SA and its mining operations in Africa.