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Afrimat’s diversification strategy finally paying off

‘We are only focused on Southern Africa’ – Andries van Heerden – CEO, Afrimat.

SIKI MGABADELI: Aggregates and construction material supplier, Afrimat has reported a 24.4% increase in first half headline earnings per share. The company also declared an interim dividend of 16 cents per share. That’s up from 13 cents in the year earlier period. Afrimat which is working on a diversification cost reduction strategy has entered into an agreement to acquire lime and associated products of producer Cape Lime.

Andries van Heerden is CEO and joins us now. Andries, thanks so much for your time today. Your diversification strategy seems to be paying off then?

ANDRIES VAN HEERDEN: Hi Siki. Yes, thank you very much. The strategy that we embarked on in, well, in the aftermath of the 2008 world-wide crisis is really starting to pay off in a big way now and I think we’re very happy with the results that we are seeing.

SIKI MGABADELI: So take us through that strategy, you’re looking at Southern Africa from what I understand?

ANDRIES VAN HEERDEN: Yeah, at this stage we are primarily, we are only focused on Southern Africa, by far the biggest exposure to South Africa with a relatively small exposure to Mozambique that is growing. In South Africa we focused on open pit mining of locally priced commodities. So we started off with our aggregates business, quarrying business and we diversified it into industrial minerals and we now produce industrial or metallurgical dolomite, metallurgical quartzite, limestone or those sorts of products. So that was really where the growth came from.

SIKI MGABADELI: And where do things stand now in terms of establishing those Mozambique operations?

ANDRIES VAN HEERDEN: The Mozambique operations are up and running in the far north of Mozambique. We have stabilised them and they are washing their own faces, but we hope to still grow that quite significantly over the next couple of years.

SIKI MGABADELI: All right. You also obviously have been on a cost reduction exercise and we see this among a lot of businesses that they’re having to look at how to make their operations a lot more efficient. What’s been your focus in that regard?

ANDRIES VAN HEERDEN: Well our focus was primarily on operational efficiency, making sure that we really extract the full value out of our asset base. We had to dispose of two or three businesses that were not contributing to our bottom line and we felt that, you know, we could rather sell them and we have disposed of them, and we’ve also looked at unnecessary costs in our business, where we could take them out, you know operational costs that we could do better and that’s been the focus over the last couple of years.

SIKI MGABADELI: You’re acquiring Cape Lime or what do you see that adding to your current portfolio?

ANDRIES VAN HEERDEN: Cape Lime is an absolutely unique business. It’s a very high quality limestone producer. The properties of the product are unique and we see a unique contribution and a further expansion of our product range.

SIKI MGABADELI: And when do you hope to wrap up that particular acquisition? Where do things stand now?

ANDRIES VAN HEERDEN: We’ve just about finished. We’ve finished the due diligence, we are in the process of a final process of preparing the submissions to the Competition Commission and getting approval for the mineral rights transfer. That all should take us at least another three months before we’ll be able to wrap it up.

SIKI MGABADELI: Ok, and what impact did the temporary closure of Highveld Steel have on Evraz Infrasors?

ANDRIES VAN HEERDEN: Infrasors operates three mines, it is Littleton Dolomite, it’s the Marble Hall limestone mine and Delf Silica. The closure of Highveld impacted our Littleton operation, and it did subtract some of the good growth that we’ve seen in the other two mines, where the other two mines have really started producing stellar results. We saw a bit of a bleeding of those results away in Highveld, or in the loss of Highveld.

SIKI MGABADELI: Your overall outlook then for the business, I mean the trading environment is not easy for anyone right now, or what is your outlook as a business?

ANDRIES VAN HEERDEN: We have a wide variety of products, we have quite a big exposure still to construction and the space that we operate in, the government spend on road infrastructure, on water and sanitation, human settlements, those budgets are at the highest level ever and its still growing very strongly and we are benefitting from that quite significantly, so that is positive. And on our industrial minerals business, there is still a lot of market penetration that we can do with some of our products and especially with import replacements with the weak Rand and things like that, so all in all we are very confident that the business will remain strong.

SIKI MGABADELI: All right, we’ll leave it there. Andries van Heerden, the CEO of Afrimat.

 

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