Our opinion on the current state of AFRIMAT(AFT)

Afrimat, an open-pit mining company based in Southern Africa, has developed a robust reputation for its diverse supply of composites, construction materials, and other commodities to various industries. Historically one of the best performing shares on the Johannesburg Stock Exchange (JSE) until the end of 2015, Afrimat has navigated through periods of economic turbulence, including the COVID-19 crisis, and demonstrated resilience in a fluctuating commodities market.

The company reached a notable high of R76 on April 6, 2022, but since then, its share price has experienced a decline, coinciding with the downturn in the commodities cycle. Afrimat has, however, strategically insulated itself from the broader difficulties facing the construction industry through its acquisition of the Demaneng iron mine in the Northern Cape. This acquisition underscores Afrimat’s approach to mitigating sector-specific risks and stabilizing its earnings.

Further diversification efforts have seen Afrimat expanding into other base minerals such as manganese, chrome, and coal. The CEO, Andries van Heerden, has emphasized the company's proactive strategy in acquisitions, which has been a significant component of its growth. Notable acquisitions include a non-binding interest in Unicorn Capital Partners for an anthracite mine, the purchase of Coza Mining, which is involved in mining for iron and manganese, and the acquisition of the Gravenhage manganese mine in the Kalahari Manganese Field for $45 million plus an additional R15 million. The company also acquired Glenover Phosphate for R550 million.

On March 20, 2022, Afrimat transitioned its listing from the Basic Materials Construction and Materials sector to the General Mining sector on the JSE, reflecting a more accurate representation of its business operations. This was followed by the strategic acquisition of the construction materials company Lafarge for $6 million, demonstrating Afrimat's continued expansion and consolidation within the industry.

Financially, Afrimat has shown strong performance, with a report for the six months to August 31, 2023, indicating a revenue increase of 9.6% and a rise in headline earnings per share (HEPS) by 4.4%. The company's net asset value (NAV) also increased by 10.8% to 2750c per share. Afrimat maintains a strong balance sheet with a significant net cash balance and a favorable debt-to-equity ratio, highlighting its financial health and operational efficiency.

Looking forward, Afrimat provided a trading statement estimating that HEPS for the year ending February 29, 2024, would rise by between 21% and 26%. This forecast suggests continued financial improvement and operational success.

Despite the general decline in commodity prices, which has impacted shares across the sector, Afrimat's well-diversified business model and low debt levels position it as a valuable investment. The recent approval from the Competition Commission for its acquisition of Lafarge further strengthens this position. With a price-to-earnings (P/E) ratio of 13.44, Afrimat presents as a reasonably priced investment, particularly for those looking to capitalize on opportunities within the mining and materials sector.