Key message: The Lafarge integration is going well with a focus on returning production to normal levels.
- Afrimat hosted an Investor Day.
- Lafarge: of key interest was the Lafarge update. 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 1HFY25. The aggregates and ash operations are profitable. Management is confident of a turnaround at Lafarge and believe that the middle management team is strong – they have been demoralised through a lack of capital to maintain operations. Capex of R150m/yr is expected in FY25 and FY26 to stabilise the operations.
- Based on the expected profitability of the aggregates and ash business, payback on the Lafarge acquisition will be approx. 3-4 years. The cement business in effect remains a free option – the acquisition is justified without having to account for the cement operation. Key for the cement business is a stabilisation of production and getting to breakeven. The next step is to look at various options for this business and decide if it is to be a core division.
- Iron Ore: the year has started slowly with AMSA having operational challenges at Vanderbijlpark – 1H local volumes will be impacted. No significant recovery in export volumes is yet evident. Afrimat is looking to increase export allocation in 2027 when a re-allocation to junior miners is planned by Transnet (Afrimat is classed a junior miner).
- Nkomati: Nkomati ROM tonnages achieved 70kt – 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). The underground operations have been challenging.
- Glenover: Expectations for Glenover have been scaled down with only Phase 1 of the development is underway.
- Construction Materials: a strong recovery in demand driven mainly by roads (nationally) and ballast purchases by Transnet.
- Industrial Minerals: There has been an overall increase in demand through 2H FY24 into FY25 and management expect operating profit levels to return to those in FY23 (R50m).
- Nkomati and Lafarge provide growth in the ST, with iron ore volumes at low levels (Transnet and AMSA issues) but with a recovery expected.