Key message: A weak result but a better performance is expected in FY26.
- Afrimat released FY25 results, with HEPS declining 78% to 71.4c on a 36.7% increase in revenue and 59% decline in operating profit. The operating margin declined to 5.7% (from 18.9%) largely due weak performances from Iron Ore and Anthracite and a loss from Cement. Cash generation improved in 2H with cash conversion remaining high at 1.4 times. Debt levels have peaked at just over R1.8bn and management are looking at a rapid paydown of this debt over the next two years.
- Construction Materials: good performance with the Lafarge aggregates and ash businesses contributing for 10 months. The Lafarge businesses have been successfully integrated and are performing well.
- Cement: a loss of R285m was recorded with the state of the plant in worse shape that expected. Maintenance costs were higher than expected but breakeven is expected in the 1H FY26. Customers have been regained and the new ultra-extended cement is selling well.
- Industrial Minerals: The suspension of loadshedding has been good for clients and the division posted a good performance.
- Iron Ore: Export iron ore sales increased marginally and are approx. 16% below the allocated tonnage as the Transnet performance continue to be poor. 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 recovered well into 2H as AMSA recovered from the furnace freezes in 1H. The potential to gain more export capacity through allocation to smaller miners in 2027 could boost export volumes.
- Anthracite: Nkomati was disappointing with the underground mine proving difficult (and at risk of being closed if the performance does not improve. A change in management has improved the overall performance of the mine. Five export ships (at least) are expected in FY26 – 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 FY26.
- We expect a better performance in FY26 with an improvement in local iron ore sales, a better result from Nkomati and the cement business to break even at least.