Black empowered construction materials manufacturer Afrimat Limited is listed in the ‘Construction & Building Materials’ sector of the Main Board JSE.

On listing (7 November 2006) the group comprised two established construction materials specialists, Lancaster and Prima, both with more than 40 years’ experience in this industry. Subsequently the group has acquired Malans Quarries, Denver Quarries, Scottburgh Quarries and Maritzburg Quarries.

Afrimat is a major contender in the construction materials industry with a total of 57 operations nationwide as well

as contract crushing, drilling and blasting capability. The consolidated group is a leading supplier in the Western and Eastern Cape, KwaZulu-Natal, Eastern Free State and Namibia.

  • 22 quarries
  • 2 gravel mines
  • 6 sand mines
  • 19 readymix concrete plants
  • 8 precast factories
  • Vast fleet of state-of-the-art mobile crushing equipment, delivery vehicles and earthmoving equipment
Afrimat operates through three key divisions:
1. Mining & Aggregates
Stone sales volumes for comparable period 2006/07 – 1,4 million tonnes

Stone volume

Stone average selling price*

*6 months to August 2007

This division produces various sized Mining & Aggregates including stone, gravel and sand primarily for large scale civil engineering and infrastructure projects.

Afrimat’s quarries supply the raw material for the group’s Readymix Concrete and Concrete Manufactured Products divisions.

Three new quarries have been commissioned since listing. Further quarries in Scottburgh and Pietermaritzburg have been acquired.


2. Concrete Manufactured Products
Bricks/blocks sales volumes for comparable period 2006/07 – 6,4 million

Bricks/blocks volume growth*

Bricks/blocks average selling price*

*6 months to August 2007

The group manufactures concrete bricks, building blocks, brick paving, walling and moulded concrete products. The focus of the KwaZulu-Natal and Free State factories is concrete blocks and bricks for the high-growth low-cost housing market.

A block manufacturing plant in Scottburgh has been acquired since listing.

3. Readymix Concrete
Volumes for comparable period 2006/07
– 106 000m³

Volume growth*

Average selling price*

*6 months to August 2007

Readymix concrete is made on demand and transported to site by concrete mixer trucks. The division supplies primarily large scale civil engineering and infrastructure projects. Most of the division’s non-cement raw material needs are sourced from the group’s own quarries.

Two new readymix plants have been commissioned since listing.

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Production Capacity
Adequate capacity exists in all operations to meet current market demand. Production plants normally operate a single shift during week days. Any increase in demand could be easily accommodated by increasing the number of shifts per day, working weekends and deploying mobile crushing equipment in quarries.

Major sources of revenue

  • Roads
  • Low-cost housing
  • Ballast for railroads

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Interim Results 2007

  • Unaudited pro forma HEPS up 23%
  • Operating margin of 23,9%
  • NAV of 318 cents per share
  • Strong organic growth

For the six months to August 2007 Afrimat more than doubled headline earnings from this time last year to R47,6 million. Revenue for the period amounted to R281,5 million, generating net profit of R46,4 million. Pro forma headline earnings per share of 41,6 cents (assuming the inclusion of all acquisitions for the full comparative six months and for the full six months of the period) increased by 23%. Afrimat is recording excellent profitability with operating margins of 23,9%, one of the highest in the sector.

The comparative results for the six months to August 2006 only reflect the results of the Prima group in terms of the requirement of IFRS 3 “Business Combinations”. The results for the six months ended August 2007 include Prima and Lancaster for the full period, Malans/Denver for three months and Scottburgh/Maritzburg for two months.

Key ratios

Current assets:current liabilities 1,54:1
Cash on hand R71,4 million
Debt less cash:equity 1,9%
Debt:equity 18,6%
Total liabilities:shareholders’ funds 58,8%
Retained income R203 million
Interim dividend R9,3 million


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On 1 October 2007 Afrimat announced the appointment of Hendrik Verreynne as Financial Director with immediate effect. Prior to joining Afrimat Hendrik, a chartered accountant, was Financial Director for Oceana Brands Limited. Previously he was a senior executive in finance for Woolworths and the Financial Director of Sea Harvest.

Hendrik has been tasked with streamlining the reporting systems and integrating the financial systems to ensure greater efficiency across the operations.

He will also be focussing on improving open communication with investors.

Hennie van Wyk, Afrimat’s former Financial Director, remains a non-executive director on Afrimat’s board.

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In terms of its vision Afrimat is seeking to become the ‘most admired construction material company in Southern Africa’. To achieve this Afrimat’s strategic priorities over the next year will focus on maintaining healthy profit margins and bedding down the acquisitions.

The group will also seek to grow market share, enter new high growth markets and continue to evaluate appropriate acquisition opportunities.

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Malans/Denver Acquisition

In February 2007 Afrimat announced the acquisition of Cape-based Malans Group (“Malans”) and Denver Quarries (“Denver”) for R129 million (“the acquisition”). The acquisition received Competition Commission approval at the end of May 2007.

The purchase consideration was settled through the issue of 2 941 176 new Afrimat shares at 765 cents per share and the balance in cash. The cash portion was funded from available cash resources and the vendor placing of 6 522 065 new Afrimat shares at 920 cents per share.

In terms of the agreement of sale, Malans warranted net profit after tax (“NPAT”) of R10 million for the year to February 2007. Denver was not obligated to warrant profits in terms of the agreement.

Malans has susequently reported NPAT of R10,5 million, while Denver has reported NPAT for the same period of R6,5 million. IFRS adjusted results for the year to February 2007 for Malans reflect NPAT of R13,9 million and for Denver reflect NPAT of R7,6 million.

Acquisition summary

  Malans Denver
Purchase price R76 million R53 million
Profit warranty R10 million N/A
NPAT 2007 R10,5 million R6,0 million
NPAT 2007 IFRS R13,9 million R7,6 million

Operational overview

Malans Denver
  • 4 quarries and gravel mines in Jeffrey’s Bay, Paarl, Wellington, Malmesbury
  • 4 sand mines in Cape Town, Wellington – average lifespan of 15 years
  • Rubble crushing operation- (lower grade aggregate). Fleet of mobile equipment
  • Sand and mobile crushing - expected to be key growth driver
  • Large volume quarry – 1,3 – 1,5 million tonnes p.a. in Port Elizabeth

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Scottburgh/Maritzburg Acquisition

On 16 July 2007 the group announced the acquisition of two quarries and a concrete block and brick factory in KwaZulu-Natal (“the Scottburgh acquisition”) for an undisclosed amount.

There is a sizeable quarry in Scottburgh and the quarry in Pietermaritzburg which was dormant on acquisition, has been brought on stream and successfully commenced production. The quarries complement Afrimat’s five existing quarries in KwaZulu-Natal and Free State while the new block plant will augment the group’s existing block operations in the region. These quarries have an estimated lifespan of 15 years.

The acquisition is key to the group’s strategy of strengthening its position in metropolitan areas. The new quarries in these high growth areas will provide Afrimat with access to the burgeoning urban centres of Durban and Pietermaritzburg.



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Shares In Issue

There are currently 133,8 million shares in issue. Included in this number are the 9,5 million shares issued in June in respect of the Malans and Denver acquisition. 

The additional shares issued had a slight dilutionary effect on the group’s previous BEE shareholding of 21%. Going forward the group is seeking to boost BEE shareholding which could have a dilutionary effect on earnings per share.


Directors’ dealings

All Afrimat directors are tied into a two-year equity lock-in period with disposal restricted to 25% in each of the first two successive years. All restrictions on disposal fall away in year three. Since February 2007 year-end until 30 November 2007 the following directors’ dealings have taken place:

Date Director No. of shares Price per share R Nature of transaction
1 June 2007 PG Corbin 700 000 10,54 Sale
1 June 2007 F du Toit 759 900 10,54 Sale
6 June 2007 F du Toit 340 100 10,03 Sale
8 June 2007 MW von Wielligh 80 000 10,30 Purchase
14 June 2007 F du Toit 1 000 000 10,25 Sale
14 June 2007 F du Toit 300 000 10,10 Sale
18 July 2007 MW von Wielligh 400 000 10,11 Sale
18 July 2007 MW von Wielligh 400 000* 10,11 Purchase
18 July 2007 MW von Wielligh 66 200* 10,27 Purchase
18 July 2007 MW von Wielligh 333 800* 10,49 Purchase
20 July 2007 F du Toit 414 000 10,50 Sale
27 July 2007 MW von Wielligh 100 000* 10,29 Purchase
6 August 2007 MW von Wielligh 20 000* 9,80 Purchase
6 August 2007 MW von Wielligh 900* 9,50 Purchase
6 August 2007 MW von Wielligh 3 900* 9,50 Purchase
15 August 2007 MW von Wielligh 4 000* 9,50 Purchase
17 August 2007 MW von Wielligh 2 400* 9,50 Purchase
17 August 2007 MW von Wielligh 18 800* 9,27 Purchase

*future contracts

The directors dealings for the period in the majority reflect purchases by Afrimat’s Chairman, reinforcing confidence in the group’s strong growth prospects.  Francois du Toit has been disposing of his shareholding in the company within his lock-in restrictions. The disposals reflect a small percentage of Francois' shareholding and a small percentage of the shareholding he is permitted to sell in the first year.

Francois is approaching retirement and is actively investing in prime real estate assets in preparation, for which proceeds from the shares sold to date have been used. He remains a non-executive director on Afrimat’s board.

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This is the first edition of the Afrimat Investor Newsletter reflecting the calendar year 2007.
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