Ahead of releasing its interim results for the six months ended August 31, JSE-listed construction materials and industrial minerals company Afrimat has advised that there will be a decrease in the base returns that its shareholders have become accustomed to.

The company, however, assures shareholders that it is focused on eliminating operational losses in its cement operation and unlocking potential that is present in the business, including by developing new innovative cement products.

Afrimat is also undertaking a strategic review of its kiln performance.

On the mining side, the group anticipates domestic iron-ore sales to be slightly lower across the second half of the financial year owing ArcelorMittal South Africa closing its Newcastle Works plant. This follows decent local iron-ore sales having been recorded in the first half of Afrimat’s financial year.

International iron-ore sales are expected to remain similar in the remainder of the year, with these iron-ore sales having been “satisfactory” in the first half of the year.

With anthracite, Afrimat remains focused on increasing exports and keeping local take-offs as consistent as possible; however, local sales are uncertain given the possible closure of ferrochrome smelters in South Africa.

“It is not tariffs in the US that will count against us, but rather the lack of protection, infrastructure investment and maintenance that is putting immense pressure on our customers,” Afrimat asserts.

The group aims to support customers while also exploring alternative markets.

Some positive developments in the six months under review include operational improvements at the Nkomati anthracite mine, in Mpumalanga; an improvement in aggregate sales volumes; and information and management systems having been integrated in respect of acquisitions in the period, resulting in substantial monthly cost savings for the group.

This is especially prudent as Afrimat works to invest time and capital in bringing newly acquired quarries from Lafarge South Africa into production.

Through precise data collection and processing, Afrimat has managed to enhance the operational efficiency of its quarries in the second quarter of the financial year, which resulted in improved profitability.

The group confirms that it has regained market share previously lost simply by providing better service and ensuring product availability for customers in the aggregates business.

Afrimat plans to leverage its partnership with Transnet, as 50% of Afrimat’s owned quarries are Transnet-approved, to support infrastructure development and maintenance across six major rail corridors.

On the cement side, Afrimat is reducing reliance on costly and environmentally taxing components, as well as incorporating extenders such as fly ash and slag, which are both abundantly available to the company.

The group has made significant capital investments at the Lichtenburg cement factory to address historical underinvestment and, while major infrastructure upgrades are complete, minor operational efficiencies remain.

The company plans to address this with the help of five dedicated mechanical and electrical engineers having been deployed on site, who are focusing on enhancing plant reliability and reducing production interruptions.

Overall, Afrimat says demand for its cement products remains strong, with stable and rising bulk and bagged cement sales.

In fact, July marked the highest monthly sales for the group. The only constraint to further growth is the reliability of the kilns, which is being actively addressed through engineering interventions.

Afrimat will update the market in September once management has greater certainty on the group’s financial position.