Our opinion on the current state of AFRIMAT(AFT)
Afrimat (AFT) is an open-pit mining company that supplies composites, construction materials, and other commodities to a range of industries in Southern Africa. Until the end of 2015, Afrimat was one of the best-performing shares on the JSE. The share broke up out of a 3-year sideways pattern, which included the COVID-19 crisis. It rose to a peak of R76 on 6th April 2022, but has been declining since then as the commodities cycle came to an end.
The acquisition of the Demaneng iron mine in the Northern Cape has insulated Afrimat against the difficulties in the construction industry. The company is also looking to diversify into other base minerals like manganese, chrome, and coal. The CEO, Andries van Heerden, said that Afrimat was known for its success in acquisitions and was still evaluating potential acquisitions. On 26th May 2020, the company announced that it had submitted a non-binding expression of interest to Unicorn Capital Partners (in which it already owns 27%), which runs an anthracite mine. The offer is for 1 Afrimat share for 280 Unicorn shares.
The company benefited from rising iron ore prices due to supply constraints in Brazil and rising demand from China. On 17th August 2020, the company announced that it had bought a mining exploration company (Coza Mining) involved in looking for iron and manganese in the Northern Cape for R300m. On 21st May 2021, the company announced the purchase of a manganese mine, Gravenhage, in the Kalahari Manganese Field, 50km from Hotazel for 45m plus R15m. On 10th December 2021, the company announced the acquisition of Glenover Phosphate for R550m.
On 20th March 2022, the company announced that its listing had been moved from Basic Materials Construction and Materials to the General Mining sector, which better reflected its business. On 20th June 2023, the company announced that it had acquired 100% of construction materials company, Lafarge, for 6m, less any amounts categorised as leakage under the Share Purchase Agreement.
In its results for the year to 29th February 2024, the company reported revenue up 23.9% and headline earnings per share (HEPS) up 24%. The company said, "Operating profit increased by 19.8% to total R1.2 billion (2023: R961.6 million), delivering an operating profit margin for the Group of 18.9%. The diversified position Afrimat has adopted, together with the efficiency projects that are in place, helped the Group to counter impactful economic headwinds."
In a pre-close briefing on the 6th of August 2024, the company said, "In the first quarter (March, April, May) ("Q1") the bulk commodity market was lacklustre. By the second quarter (June, July and the first week of August) ("Q2"), volume increases were evident, as domestic customers with furnaces started up again, and tender activity increased in road, rail and small infrastructure projects."
In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would fall by between 75% and 85%. Like all commodity companies, Afrimat's shares have declined with the drop in commodity prices, but this company is well diversified and has very low debt levels, making it good value. On 10th April 2024, the company announced that it had received approval from the Competition Commission for its acquisition of 100% of Lafarge. On a P:E of 11.48, it seems reasonably priced to us. Technically, the share is in a volatile upward trend, which we believe will continue.
The acquisition of the Demaneng iron mine in the Northern Cape has insulated Afrimat against the difficulties in the construction industry. The company is also looking to diversify into other base minerals like manganese, chrome, and coal. The CEO, Andries van Heerden, said that Afrimat was known for its success in acquisitions and was still evaluating potential acquisitions. On 26th May 2020, the company announced that it had submitted a non-binding expression of interest to Unicorn Capital Partners (in which it already owns 27%), which runs an anthracite mine. The offer is for 1 Afrimat share for 280 Unicorn shares.
The company benefited from rising iron ore prices due to supply constraints in Brazil and rising demand from China. On 17th August 2020, the company announced that it had bought a mining exploration company (Coza Mining) involved in looking for iron and manganese in the Northern Cape for R300m. On 21st May 2021, the company announced the purchase of a manganese mine, Gravenhage, in the Kalahari Manganese Field, 50km from Hotazel for 45m plus R15m. On 10th December 2021, the company announced the acquisition of Glenover Phosphate for R550m.
On 20th March 2022, the company announced that its listing had been moved from Basic Materials Construction and Materials to the General Mining sector, which better reflected its business. On 20th June 2023, the company announced that it had acquired 100% of construction materials company, Lafarge, for 6m, less any amounts categorised as leakage under the Share Purchase Agreement.
In its results for the year to 29th February 2024, the company reported revenue up 23.9% and headline earnings per share (HEPS) up 24%. The company said, "Operating profit increased by 19.8% to total R1.2 billion (2023: R961.6 million), delivering an operating profit margin for the Group of 18.9%. The diversified position Afrimat has adopted, together with the efficiency projects that are in place, helped the Group to counter impactful economic headwinds."
In a pre-close briefing on the 6th of August 2024, the company said, "In the first quarter (March, April, May) ("Q1") the bulk commodity market was lacklustre. By the second quarter (June, July and the first week of August) ("Q2"), volume increases were evident, as domestic customers with furnaces started up again, and tender activity increased in road, rail and small infrastructure projects."
In a trading statement for the six months to 31st August 2024, the company estimated that HEPS would fall by between 75% and 85%. Like all commodity companies, Afrimat's shares have declined with the drop in commodity prices, but this company is well diversified and has very low debt levels, making it good value. On 10th April 2024, the company announced that it had received approval from the Competition Commission for its acquisition of 100% of Lafarge. On a P:E of 11.48, it seems reasonably priced to us. Technically, the share is in a volatile upward trend, which we believe will continue.
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