Afrimat reports robust operational progress and talks with ArcellorMittal SA to save steel plant

Afrimat, the JSE-listed multi-commodity mining company from South Africa, reported considerable strides in its operations in its year to February 28, with some non-core assets sales, despite facing a challenging local economic landscape.

The mid-tier mining company, known for its diverse offerings such as construction materials, iron ore, and industrial minerals, said in a pre-close operating update Tuesday that the second half of the financial year was marked by a strong focus on operational execution.

There were turnover improvements in its aggregates business and asset sales, including non-core brick, block, readymix plants, and properties. The company's strategic divestiture efforts will enable debt reduction, with cash inflows expected in the new financial year.

Among significant milestones, Afrimat directors said that the debt-to-equity ratio remained stable, with refinanced debt mirroring its longer-term needs.

The construction materials segment saw remarkable advancements, with 80% of initiatives aimed at improving operational competitiveness already implemented. While the year-on-year revenue growth was largely attributed to a robust demand from road builders and construction projects, the effects of the sold non-core businesses will affect overall group margins.

In the cement sector, Afrimat anticipated a year-on-year increase in clinker production by 20%. Yet, despite narrowing losses, the segment faces challenges due to the unpredictability of the domestic market and disruptions from weather conditions observed in the previous financial cycle.

"Cement sales volumes are expected to show a good year-on-year increase, but the segment remains loss-making, although losses narrowed in the second half of the year," the group said.

In Afrimat's Bulk Commodities sector, local iron ore sales volumes were sustained, bolstered by a positive partnership with ArcelorMittal (AMSA). Although international sales remain satisfactory, the company was cautious about shipment constraints impacting its export capabilities.

"Afrimat remains in discussions with AMSA and eagerly awaits the outcome of its discussions with the Industrial Development Corporation and the Department of Trade, Industry and Competition. Not only is this outcome fundamental to Afrimat, it is also critical for South Africa. Beyond safeguarding thousands of jobs, it also sustains South Africa's industrialisation, rather than allowing another vital industry to collapse," Afrimat's directors said.

Significant operational upgrades were underway at the Nkomati Anthracite Mine, which had to navigate shutdowns in recent months due to challenges in the ferrochrome sector, substantially impacting local anthracite sales.

At the Glenover mine, Afrimat's technical team had performed testing, assessing different rare earth processing methods to achieve the best recovery.

As Afrimat celebrated its 20th anniversary, the company said it remained committed to leveraging strategic partnerships to advance its projects. The acquisition of Lafarge, completed in April 2024, aimed at enhancing quarrying access, was already paying dividends, with management interventions expected to yield positive results in the coming financial cycles.

In light of challenges presented by cheap imports and an underperforming economy, Afrimat was calling for collaborative efforts with government bodies to strengthen local trade protections and support the mining sector's resilience.

Trading conditions were anticipated to stay tough unless significant policy actions were implemented, management said.

Afrimat was evaluating projects to expedite timelines and unlock shareholder value through strategic partnerships, as the company braces for a tough trading climate in the immediate future.

The share price was marginally higher at R41.24 on the JSE on Tuesday morning, having fallen about 20% over a year.

BUSINESS REPORT