Afrimat boosts revenue by 24% in FY23-24 as Lafarge integration continues
Andries Van Heerden, Afrimat's Group CEO, stated that he was exceptionally pleased with the group’s performance for the year ended 29 February 2024, which was supported by a revenue increase of 23.9 per cent from ZAR4.9bn (US$268.9m) to ZAR6.1bn (US$334.8m). Operating profit increased by 19.8 per cent to total ZAR12bn (2023: ZAR961.6m), delivering an operating profit margin for the group of 18.9 per cent.
“The diversified position Afrimat has adopted, together with the efficiency projects that are in place, helped the Group to counter impactful economic headwinds.
Afrimat continues to focus strongly on cash generation and preservation. The group’s balance sheet remains strong, with cash and cash equivalents at the end of the year of ZAR504.7m, an improvement of 80.7 per cent on the previous year. Net cash from operating activities of ZAR1.2bn was generated.
The debt:equity position remains exceptionally strong, claims Afrimat, at 1.4 per cent compared to 4.5 per cent in 2023. It is expected that this ratio will increase as the Lafarge integration takes place. Afrimat will simultaneously ensure that cash generation is robust, allowing the group to quickly pay back debt.
The Construction Materials segment experienced a 22.3 per cent increase in revenue from R1,8 billion to ZAR2.2bn and an improvement in operating profit of 111 per cent to ZAR273.5m compared to the previous year of ZAR129.6m. The uplift in revenue was the result of increased demand from road and rail industries, while the improvement in operating profit was further driven by successful efficiency improvement programmes.
Lafarge integration
Mr Van Heerden said that Afrimat is excited and ready for the Lafarge integration now that all the preceding conditions have been fulfilled. “The acquisition will increase Afrimat’s offering in the construction materials space by expanding the Group's quarry and ready-mix operations nationally. Additionally, access to the fly ash operations provides a foothold in the cement extender market. The grinding plant will allow Afrimat to grind materials as value-added products for our own operations as well as for our customers, while the cement kilns allow the Group to enter the cement value chain competitively.”
Afrimat entered into a share purchase agreement with a Holcim Group subsidiary, Caricement BV, in which the group will acquire 100 per cent of the issued share capital of Lafarge South Africa Holdings Proprietary Ltd. The acquisition has been structured as a locked box transaction, effective 31 December 2022, and the purchase consideration payable is in the amount of US$6m. In addition to this, Afrimat agreed to repay or procure the repayment of the loan amounts owed equating to ZARR900m.
The purchase consideration of US$6m and the first tranche of the loan amount of ZAR500m was paid on 17 April 2024. The remaining balance of ZAR400m is payable within 12 months after the closing date.Afrimat took over operational management on 23 April 2024.
Outlook
Afrimat indicated that it will continue to fortify its diversified position to ensure sustainability and growth into the future. It now has different project maturation profiles, with the current focus being on implementation to ensure optimal value is achieved. Given this, the group will remain cautious and prudent in all its capital allocation decisions.
Mr Van Heerden explained that the integration of the Lafarge transaction brings Afrimat full circle to its origins in quarrying, and the additional products, together with a broader national footprint, could positively alter the delivery capability of the group and the Construction Materials segment. “This is an exciting project, which is expected to deliver good results in future,” he added.
