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AFRIMAT LIMITED - Announcement Of Unaudited Condensed Consolidated Interim Financial Results For The Six Months Ended 31 August 2021

Release Date: 04/11/2021 07:05
Code(s): AFT     PDF:  
Wrap Text
Announcement Of Unaudited Condensed Consolidated Interim Financial Results For The Six Months Ended 31 August 2021

Afrimat Limited ('Afrimat' or 'the Company' or 'the Group')
(Incorporated in the Republic of South Africa)
(Registration Number: 2006/022534/06)
Share code: AFT
ISIN code: ZAE000086302

Announcement of unaudited condensed consolidated interim financial results
for the six months ended 31 August 2021

Operating profit up 65,0% to R582,8 million
HEPS up 60,5% to 295,1 cents
Interim dividend 40,0 cents per share
Operating profit margin 24,1%
Net cash from operating activities of R806,5 million
Strong balance sheet with net cash position


Basis of preparation
The short-form announcement is the responsibility of the directors and is only a summary of the
information in the full announcement and does not contain full or complete details. The full announcement
was released on SENS on 4 November 2021. The full announcement can be found at:

Copies of the full announcement are also available for viewing on the Company's website
or may be requested at the Company's registered office, at no charge, during office hours and are also
available for inspection at the offices of the sponsor.

Any investment decision should be based on the consideration of the full announcement published on
SENS and the Company's website.

The financial statements have been prepared under the supervision of the Chief Financial Officer,
PGS de Wit CA(SA).

The Group continued to deliver exceptional results during the first half of the financial year on the back of
favourable iron ore prices which translated into strong operating cash flows. The Covid-19 pandemic remains
an important part of our strategic management with the reappearance of a third wave during mid-June.
This disruption was countered by maintaining the measures established by Afrimat management to manage
and minimise the spread of the virus and maintaining a safe operating environment for our employees and
thereby minimising the impact of this pandemic. The Group's diversification strategy, cost reductions and
efficiency improvement initiatives enabled the Group to continue delivering strong growth.

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. Headline earnings per
share increased by 60,5% from 183,9 cents to 295,1 cents.

The balance sheet of the Group remains strong with a net cash position, ending the period with cash flows
from operating activities of R806,5 million, an increase of 141,7% from the comparative 2020 period. Given
the strong cash generated from operations of close to R1,0 billion, borrowings were significantly reduced
to place the Group in this net positive cash position which supports a large portion of self-funding of
future projects.

Operational review
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.

During the six-month period under review, good labour relations were maintained with no labour action or
significant community action having occurred. The Group is committed to creating and sustaining harmonious
relationships in the workplace and addressing issues proactively. Afrimat continues to prioritise staff
development, training and education on the human capital agenda.

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.

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.

Business development
New business development remains a key component of the Group's growth strategy. The dedicated
business development team continues to successfully identify and pursue opportunities in existing markets,
as well as in anticipated new high growth areas in southern Africa.

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.

This announcement may contain forward-looking statements that have not been reviewed nor reported on
by the Company's auditors.

On behalf of the Board

MW von Wielligh

AJ van Heerden
Chief Executive Officer

Wednesday, 3 November 2021

Dividend declaration
Notice is hereby given that an interim gross dividend, No. 29 of 40,0 cents per share, in respect of the six
months ended 31 August 2021, was declared by the Board on Wednesday, 3 November 2021. There are
146 341 193 shares in issue at reporting date, of which 8 461 071 are held in treasury. The total dividend
payable is R58,5 million (August 2020: R51,6 million).

The Board has confirmed that the solvency and liquidity test as contemplated by the Companies Act,
No. 71 of 2008, has been duly considered, applied and satisfied. This is a dividend as defined in the Income
Tax Act, 1962, and is payable from income reserves. The South African dividend tax rate is 20,0%. The
dividend payable to shareholders who are subject to dividend tax and shareholders who are exempt from
dividend tax is 32,0 cents and 40,0 cents per share, respectively. The income tax number of the Company
is 9568738158.

Relevant dates of the interim dividend are as follows:
Last day to trade cum dividend                                            Tuesday, 30 November 2021
Commence trading ex dividend                                             Wednesday, 1 December 2021
Record date                                                                 Friday, 3 December 2021
Dividend payable                                                            Monday, 6 December 2021

Share certificates may not be dematerialised or rematerialised between Wednesday, 1 December 2021 and
Friday, 3 December 2021, both dates inclusive.

Financial summary
                                               Unaudited six   Unaudited six   Change       Audited
                                                months ended    months ended        %    year ended
                                                   31 August       31 August            28 February
                                                        2021            2020                   2021
                                                       R'000           R'000                  R'000*
Revenue                                            2 421 610       1 558 629     55,4     3 693 759
Operating profit*                                    582 800         353 108     65,0     1 058 901
Profit attributable to shareholders*                 403 182         250 135     61,2       776 437
Earnings per ordinary share (cents)*                   292,1           184,4     58,4         571,6
Diluted earnings per ordinary share (cents)*           282,2           181,9     55,1         559,4
Headline earnings per ordinary share                   295,1           183,9     60,5         441,7
('HEPS') (cents)                                                                         
Diluted HEPS (cents)                                   285,1           181,4     57,2         432,2
Dividends per share (cents)                             40,0            36,0     11,1         148,0
Net cash from operating activities                   806 492         333 703    141,7       767 580
Net asset value per share                              1 954           1 430     36,6         1 761
('NAV') (cents)*                                                                         
Net debt:equity ratio (%)*                              (4,1)           (3,3)    24,2           4,0
SEGMENTAL INFORMATION                                                                 
External revenue                                                                      
Construction Materials                               887 558         651 965              1 595 055
Industrial Minerals                                  336 275         238 749                514 291
Bulk Commodities                                   1 197 777         667 915              1 584 413
                                                   2 421 610       1 558 629              3 693 759
Operating profit                                                                      
Construction Materials                                79 488           2 764                104 906
Industrial Minerals                                   51 124          24 574                 55 481
Bulk Commodities*                                    453 736         325 829                907 285
Services                                              (1 548)            (59)                (8 771)
                                                     582 800         353 108              1 058 901
Operating profit margin on                                                            
external revenue (%)                                                                  
Construction Materials                                   9,0             0,4                    6,6
Industrial Minerals                                     15,2            10,3                   10,8
Bulk Commodities*                                       37,9            48,8                   57,3
Overall contribution*                                   24,1            22,7                   28,7
* Measurement period adjustment - during the reporting period, the comparative information for
  February 2021 was retrospectively adjusted in the process of finalising the accounting for the
  business combination.

Announcement date: 4 November 2021 

MW von Wielligh*# (Chairman)
AJ van Heerden (CEO)
PGS de Wit (CFO)
C Ramukhubathi
GJ Coffee*
L Dotwana*
PRE Tsukudu*#
JF van der Merwe*#
JHP van der Merwe*#
HN Pool*#
FM Louw*# (Deputy Chairman)
* Non-executive director
# Independent

Registered office
Tyger Valley Office Park No. 2
Corner Willie van Schoor Avenue and Old Oak Road
Tyger Valley, 7530
(PO Box 5278, Tyger Valley, 7536)

PSG Capital Proprietary Limited
1st Floor
Ou Kollege Building
35 Kerk Street
(PO Box 7403, Stellenbosch, 7599)

PricewaterhouseCoopers Inc.
PWC Building - Capital Place
15 - 21 Neutron Avenue
(PO Box 57, Stellenbosch, 7599)

Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue
(Private Bag X9000, Saxonwold, 2132)

Company Secretary
C Burger
Tyger Valley Office Park No. 2
Corner Willie van Schoor Avenue and Old Oak Road
Tyger Valley
(PO Box 5278, Tyger Valley, 7536)

Date: 04-11-2021 07:05:00
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