Key message: With Nkomati starting to contribute as planned and Lafarge integrated in April 2024, growth into FY25 should be achieved.

  • Afrimat released FY24 results, with HEPS increasing 24% to 567.3c on a 24% increase in revenue and 20% increase in operating profit. The operating margin declined to 18.9% (from 19.6%) largely due to the weaker Industrial Minerals result. Cash flows remain strong with all capex and acquisitions (Lafarge) to be funded from internal resources.
  • Iron Ore: Iron ore sales increased by 24% as local sales to AMSA increased by 82%, despite the poor domestic rail performance impacting sales (trucks were used to compensate for some lost tonnages). Export sales declined by 11% due to Transnet performance. Export sales are expected to be flat in FY25 before an expected Transnet recovery into FY26. There is some uncertainty over local sales volumes going forward as AMSA considers the closure of some capacity. The potential to gain more export capacity through allocation to smaller miners in 2027 could boost export volumes.
  • Nkomati: Nkomati made a profit in 2H as ROM tonnages achieved 70kt at YE – the interim steady state tonnage (this can be increased to 90-100ktpm). The yield is better than expected. 15% of production is being exported (high phos. product that cannot be sold locally).
  • Glenover: Expectations for Glenover have been scaled down with only Phase 1 of the development is underway with sales being generated from high-grade phosphate stockpile sales. Sales of phosphate concentrate and SSP will commence in FY25.
  • Construction Materials: a strong recovery in demand driven mainly by roads (nationally) and ballast purchases by Transnet.
  • Industrial Minerals: Loadshedding impacted production but curtailment agreements and gensets are now in place to mitigate this.
  • Lafarge: the Lafarge acquisition was effective from 23 April 2024. The cement division is currently loss making and management are looking to move to breakeven in 1H FY25. The aggregates and ash operations are profitable.
  • A period of consolidation is expected as Nkomati achieves initial production targets and Lafarge is integrated. We maintain our Target Price at R90.

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