Afrimat FY HEPS surge, withholds final dividend

Afrimat, the construction and mining group, has seen a surge in their annual operating profit, with a notable rise of 27.5 per cent to R471.2 million. The company attributes this growth to strong demand from its iron ore operations. The INO mine, in particular, has been a significant contributor to Afrimat's success, with a full production contributing to 34% of the improvement in the past financial year. This, coupled with a 14% increase in average prices, has provided a substantial boost to Afrimat's bottom line. The CEO of Afrimat, Andries Van Heerden, expressed optimism regarding the future outlook of INO prices. He acknowledged the volatility of the resource market but highlighted the current positive trend in prices, which he believes could persist for several months. Despite the uncertainties posed by the COVID-19 pandemic, Van Heerden remains confident in the stability of INO prices and their potential impact on the company's profitability. However, amidst the backdrop of a global recession and the prospect of a deeper economic downturn in South Africa, Afrimat has made the strategic decision to withhold its final dividend. This cautious approach is aimed at strengthening the company's balance sheet and ensuring financial resilience in the face of the ongoing pandemic. Van Heerden emphasized the importance of maintaining a strong financial position to seize potential opportunities in the market and reduce reliance on external funding sources. In the construction materials sector, Afrimat remains cautiously optimistic about the future demand for building materials despite the challenges posed by the current economic environment. Van Heerden noted a slight growth in profits over the past three years and highlighted a promising pipeline of projects across the country. With infrastructure spending identified as a key driver of economic stimulus, Afrimat anticipates a resurgence in construction activity in the medium to long term. As other players in the industry face financial difficulties, including business rescue filings and delistings, Afrimat stands out for its robust financial position and strategic focus on commodities. The company's exposure to the iron ore business and industrial minerals positions it favorably to capitalize on growth opportunities in the mining sector. Van Heerden reiterated Afrimat's commitment to exploring opportunities in the commodities market, signaling a shift away from acquisitions in the construction space. While the economic landscape remains challenging, Afrimat's decision to retain cash reserves and prioritize financial stability reflects a prudent approach to navigating uncertain times. By forgoing the final dividend, the company demonstrates a keen awareness of the importance of maintaining a strong balance sheet to weather economic uncertainties and capitalize on emerging opportunities. In conclusion, Afrimat's strategic foresight and focus on financial resilience position the company well to thrive in a volatile economic environment. With a positive outlook on INO prices and a commitment to leveraging growth opportunities in the commodities market, Afrimat remains a resilient player in the construction and mining industry.