Black empowered building supplies group Afrimat Limited successfully debuted this morning on the JSE, immediately indicating execution of its acquisition strategy when it placed the company under cautionary. The share listed strongly at R8,05 to give Afrimat a market capitalisation on listing of R1 billion. New contracts for Afrimat worth roughly R50 million in total, in line with forecast projections, have set the group on track to meet 2007 forecast revenue of R471,4 million.
Afrimat provides a diverse product range of Mining & Aggregates, readymix concrete and concrete blocks and bricks. The group has market-dominant operations in the eastern and western Cape, Namibia, northern KwaZulu-Natal and Free State.
With the pre-listing private placement almost 30 times oversubscribed, disappointed applicants and the public were left to buy shares only this morning on listing. As a result
two hours after listing more than 2,6 million shares had changed hands in 767 separate transactions with an aggregate value of R21,4 million.
R125 million was raised in the pre-listing private placement of 25 million shares at R5 a share. With R50 million going to founders of the group who had sold small stakeholdings to facilitate the listing, new capital of R75 million went directly to eliminate gearing on the balance sheet. Afrimat CEO Andries van Heerden says that this financial strength has firmly positioned the group to pursue an aggressive acquisition trail.
“The group intends to quickly expand its geographic footprint and bolster vertical integration by ensuring that most raw material is sourced from within the group,” he says. He points out that organic growth nonetheless remains a strategic objective, as evidenced by the new contracts.
Afrimat has new orders for a total of 640 000 tons of aggregate. “The strategic proximity of Afrimat’s quarries to major road projects is a key driver of new contract work,” he says citing as examples Oudtshoorn and Worcester as well as KwaZulu-Natal. The group will stake its claim to part of the R150 million P700 road linking Richards Bay to Vryheid by supplying concrete for bridges.
Van Heerden points out that Afrimat has been awarded a new mining licence for a quarry in Saldanha, a strategic move that sees the group ideally positioned to supply aggregate to the Sishen-Saldanha iron-ore rail line. “Having an existing relationship with Spoornet through work on the Richard’s Bay coal line, Afrimat was prompted to apply for the new mining licence in close proximity to the new Saldanha project.”
Afrimat is already 21% empowered ahead of Mining Charter requirements, and a staff trust will be established to increase BEE to 25,1%. Van Heerden explains that this Charter is significant as quarrying licenses must be regularly updated to ensure that Afrimat can continue mining its Mining & Aggregates in the face of ongoing demand. The 21% BEE shareholding is held by 100% black-owned company Mega Oils, represented on the Afrimat board by Loyiso Dotwana, and broad-based black consortium Kwezi Mining whose Gillian Nonhlanhla Jiyane is a non-executive director of the group.
Afrimat has also continued to entrench its positioning as a key supplier to the low-cost housing sector, with new contracts for upcoming developments in Harrismith and Qwa Qwa. Another two large contracts for over 2000 low-cost housing units in KwaZulu-Natal are due to be finalised in the near future. In the western Cape Afrimat will shortly deliver on concrete orders for 3500 low-cost houses and in addition, will quarry an area in Kommetjie to enable the municipality to launch a housing project there in time. Van Heerden says this is an exciting project for Afrimat as it will expose 700 000 tons of aggregate in the process which can then be resold in an area in which there is presently no quarry.
Looking ahead he says: “Although the merger of Prima and Lancaster is fairly recent, both companies have over 40 years experience in the market and have consistently shown profit growth through challenging market cycles. We believe that as a consolidated group Afrimat will diversify and expand, enabling us to capitalise on a flourishing market and maximise shareholder returns.”
The merged group has 18 quarries, 12 readymix plants and 8 precast factories in total. In addition 4 mobile crushing plants and 1 readymix concrete plant offer greater geographical flexibility.