Afrimat Investment Case

Afrimat is covered by the following sell-side analysts, whom you are free to contact:

Rowan Goeller

Chronux Research
rowan.goeller@chronux.co.za

Luke Bredeveldt

Primaresearch
If you wish to enquire about the research, please follow this link.

Anthony Clark

Smalltalk Daily
vrech@kris.co.za

Afrimat Investment Case

Diversification is the key to growth for Afrimat. This is underpinned by the entrepreneurial flair that is embedded in the Group’s DNA. These factors come together in a harmonised way that ensures all obstacles are carefully navigated and overcome to drive superior returns for shareholders.

Afrimat is a leading black-empowered open pit mining group that supplies industrial minerals and construction materials to a range of businesses and industries across southern Africa. In addition, the Group supplies bulk commodities to both local and international markets. It is listed on the ‘Construction & Materials’ sector of the Johannesburg Stock Exchange (JSE) Main Board.

The business is built on the principle of an entrepreneurial culture that seeks to ensure sustainability and profitability by positioning itself as a multi-commodity, mid-tier miner, which is also able to produce and supply construction materials and high-quality industrial minerals.

Afrimat is known for being a highly successful business as a result of its strategic focus, thorough planning, meticulous execution and constant monitoring and measurement of the initiatives that it implements. This is done within an ethical organisational framework, and a people-centric culture that breeds success and rewards performance. This ethical viewpoint further ensures a caring organisation that deems environmental, social and governance (ESG) factors to be critical to its operations, and engages regularly and transparently with all stakeholders, including the communities within which it operates.

After listing in 2006, when Afrimat’s main focus was on aggregates and quarries, the Group embarked on a diversification strategy in order to ensure the long-term success and sustainability of the business. This strategy has effectively protected Afrimat against lower economic growth rates in South Africa, with the further diversification into bulk commodities helping to position the Group as a Rand-hedge, able to earn foreign currency.

The diversification strategy has also supported Afrimat in being able to maintain an outstanding Compound Annual Growth Rate (CAGR) of Profit After Tax of 22% from 2009 to 2021. An exacting focus on capital allocation and cash conversion has further ensured the Group’s ability to be a consistent dividend payer, with a dividend cover of 2,75 times in place.

When assessing Afrimat as a potential investment opportunity it is also important to note the Group’s key strengths, which include the following:

Exceptionally experienced executive and operational management

Cash generation | free cash flow focus

Track record of excellent capital allocation

Operational diversification (hedge against volatility)

Moat (geographic locations, unique metallurgy & structural cost advantage)

Scalability reduces cyclicality (protects against commodity price fluctuations)

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