Afrimat plans to ramp up production at its mines, benefit from efficiency initiatives, further its develop its greenfields Glenover project and may even make one or two acquisitions in its new financial year.
This was according to chief financial officer Pieter de Wit, who said yesterday after the publication of the group’s annual results for the year to February 28, that the group remained resilient after lower iron ore prices and higher costs - such as for fuel that were beyond the group’s control - caused a dip in headline earnings for the year.
He said there were many projects underway with fixed timelines that were not yet contributing to the results, the balance sheet remained strong, with strong cash flows and little debt, and for example, there might be acquisition opportunities opening up from international companies that no longer wished to be in South Africa.
“A rise in future volumes, as these mines reach a steady state, is expected in the coming year,” said CEO Andries van Heerden.
The mid-tier open-pit mining company that provides industrial minerals, bulk commodities, construction materials and future materials and metals, reported a 4.9% increase in revenue to R4.9 billion in the year ended February 28.
Operating profit fell by 13.3% to R1bn. Headline earnings a share declined 15.7% to 457.6 cents. Net cash from operating activities of R1bn was generated, as well as R680m from a successful equity raise, resulting in the debt:equity ratio decreasing to 4.4% from 12.1%, notwithstanding that R963m was advanced into various capital investments during the year. A final dividend of 110 cents per share was declared.
Van Heerden said: “Diversification, increased volumes from the mines coming online and efficiency improvements remain the cornerstone of our strategy and are used to counter macro-economic impacts beyond management’s control.”
Initiatives that contributed positively to results included commissioning of the Jenkins iron ore mine, the turnaround of the Nkomati anthracite mine that was expected to reach full production in the months ahead, and improvement initiatives at existing operations.
Detractors were the decline in iron ore prices - to an average $119 (R2305) per ton this year from $155 per ton last year - and the economic slowdown, which impacted the construction materials and industrial minerals businesses, exacerbated by a rise in input costs such as diesel, explosives and electricity.
The bulk commodities segment, consisting of the Demaneng and Jenkins iron ore mines, and the Nkomati mine, contributed 81,9% to group operating profit. This was largely due to increased volumes from Jenkins, the turnaround of Nkomati and cost-saving initiatives.
Jenkins was fully operational and with Demaneng sold 1 280 299 tons for the year versus 1 190 132 tons in 2022. The operating profit decreased by 15.6% due to the decline in the iron ore price and a rise in input costs, but a healthy operating profit margin of 40.3% was generated from the iron ore mines.
“This segment is well-positioned to weather the volatility of the iron ore price because it is a low- cost producer and has fixed pricing agreements for its inland iron ore and anthracite revenue.”
Technology solutions were rolled out at Jenkins and Demaneng, resulting in cost savings which countered, to an extent, the rise in the diesel price and the fall in the iron ore price.
Nkomati became profitable and contributed 23.1% to the segment’s revenue for the year.
The long-term sustainable life of mine plan was being enhanced through the opening of two opencast pits and the continued development of the underground operations.
The Industrial Minerals business saw its operating profit fall 41.9% to R49.4m due to the impact of the economic slowdown, exacerbated by electricity interruptions
The Construction Materials segment also felt the impact of the slowdown in economic activity and electricity supply interruptions which caused operating profit to decrease by 17.7% to R129.6m.
The Glenover project started its first production. The project has three businesses – fertiliser; vermiculite for various applications, and rare earth elements that support technology such as permanent magnets and battery technology.
BUSINESS REPORT