Afrimat posts first-half earnings slump, skips interim dividend

Highlights

Afrimat's group revenue drops 4.3% to R5.1 billion and operating profit falls 32.8% to R255.2 million, mainly due to sharp deterioration in bulk commodities and wider cement losses.
Earnings per share plummet 97.4% to 2.6 cents, no interim dividend is declared as weak performance pressures cash returns to shareholders.
Iron ore export revenue is hit by a stronger rand and shipping costs up 49.1% due to Iran conflict, while Nkomati Anthracite revenue rises 9.2% to R543 million but records a R2.7 million loss.

First-half results reflect strain in bulk commodities

According to Moneyweb, Afrimat says in a Sens announcement on Thursday that group revenue decreases by 4.3% to R5.1 billion, mainly because of lower revenue in its iron ore and cement businesses, although growth in aggregates partly offsets the decline.

Operating profit falls by 32.8% to R255.2 million, with the operating margin at 5%. That figure includes a once-off profit of R95.5 million from the disposal of divested operations, while earnings per share decrease by 97.4% to 2.6 cents per share.

The sharp deterioration is driven primarily by the bulk commodities segment, where operating profit drops from R445.1 million to R8.6 million, alongside a wider operating loss in the cement business. Afrimat says the larger decline in headline earnings reflects the exclusion of profits from business disposals, including divested operations and non-core assets.

No interim dividend is declared for the six-month period as weaker performance pressures cash returns to shareholders.

Costs and market conditions cloud recovery outlook

Within construction materials, revenue edges up 0.2% to R2.8 billion and operating profit more than doubles to R421.7 million. Afrimat says aggregates and fly ash deliver a strong first half, with revenue rising 5.3% to R2 billion, supported by a more focused portfolio, completed capital projects and demand from rail maintenance and infrastructure work.

The cement business remains loss-making, posting an operating loss of more than R146 million. In bulk commodities, revenue declines 3.3% to R1.8 billion, while iron ore and manganese mines report a 7.9% drop in revenue to R1.2 billion, as higher export volumes largely offset weaker domestic volumes.

Afrimat says lower domestic sales volumes, weaker realised export prices, higher mining costs and the lower-margin nature of manganese sales hurt profitability. It adds that iron ore export revenue is negatively affected by a stronger rand and shipping costs that jump 49.1% because of disruptions linked to the Iran conflict, with the average rand-dollar exchange rate at R16.38/$ during the period under review.

Nkomati Anthracite Mine increases revenue by 9.2% to R543 million on significantly higher export volumes, but still records an operating loss of R2.7 million, largely because ferrochrome smelter closures affect demand. Afrimat says rising fuel costs tied to the Iran conflict and delays in public-sector project payments remain risks, although management maintains that the group’s diversified base supports cash generation, debt reduction and operational reliability as conditions recover.

In our earlier article on the conflict-driven surge in oil shipping costs, we explained how attacks and rerouting risks in key corridors such as the Strait of Hormuz and the Red Sea have pushed tanker rates sharply higher. We noted that freight and insurance are becoming a much larger share of crude prices, lifting fuel costs for importers and feeding through to broader consumer and industrial inflation pressures.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.