Key message: A better 2H is expected after a weak 1H. Afrimat will look to consolidate the Lafarge acquisition and should benefit from improved iron ore sales and anthracite performance.
- Afrimat released 1H FY25 results, with HEPS declining 80% to 53c on a 44.3% increase in revenue and 4% increase in operating profit (-45% excluding a R262m gain on bargain purchase). The operating margin declined to 13.5% (from 18.8%) largely due weak performances from Iron Ore and Anthracite and a loss from Cement. Cash flows were negative due higher working capital requirements (iron ore inventories and overdue payments to Lafarge suppliers).
- Construction Materials: good performance with the Lafarge aggregates and ash businesses contributing for 4 months (R46m in operating profit). Underlying growth was approx. 10% in the existing Afrimat businesses.
- Cement: a loss of R146m was recorded with the state of the plant in worse shape that expected. Production is increasing and breakeven expected shortly, with the potential for 2H to reach breakeven.
- Industrial Minerals: The suspension of loadshedding has been good for clients and the division posted a good performance.
- Iron Ore: Export iron ore sales declined by 9% and are approx. 20% below the allocated tonnage. Profits were impacted by lower prices, a stronger ZAR and higher shipping costs. Export sales are expected to grow into FY26 with an expected Transnet recovery into FY26/27. Local sales declined 31% as AMSA shut both VDB furnaces in 1Q. Volumes had recovered in 2Q and are running close to the agreed 100ktpm at present. The potential to gain more export capacity through allocation to smaller miners in 2027 could boost export volumes.
- Anthracite: Nkomati was disappointing despite a revenue increase with profits falling from 2H FY24 as a fall of ground in the underground mine impacted costs. Two export ships (at least) are expected in 2H – this adds R20-25m in operating profit per ship.
- Future Materials & Minerals: Startup losses continue for HG phosphate and SSP. The division should be breakeven in 2H.
- A better 2H is expected with local iron ore volumes recovering and anthracite delivering a stronger 2H. The losses in cement should be reduced in 2H to close to breakeven.