Tuesday, 11 November 2014 13:24

Afrimat share price rally whilst construction sector sheds a quarter of its value

Published by
Rate this item
(0 votes)

Afrimat has seen a 391% rally in its share price since November 2010, against a construction sector that has shed a quarter of its value.

Andries van Heerden

Its half-year results show a 24% gain in earnings. Giulietta Talevi asked Afrimat CEO how long this can continue. You're doing well when the so-called blue-chip firms seem to be in trouble. What's worked in your favour? Government is spending a lot of money, but on smaller projects making it possible for smaller contractors to compete effectively.

The listed construction guys need a set critical mass to contract before it's worth their while. We benefit from small projects as much as from bigger projects. Where is government spending money? This year, it is going to spend R33-billion on roads (it has) never spent that much in one year.

It's come up very consistently from about R10-billion in 2006. We're also seeing a shift in spending on water systems, reservoirs and pipelines, especially in rural areas and townships, and we supply a lot of material to those projects. Is Afrimat well positioned to benefit from any sort of work then? We sell aggregates that's crushed stone that they use so when you arrive at our gates and buy a bakkie load of material, or whether we have to load a train for you, it doesn't really matter.

Analyst Anthony Clark has a 'buy' on Afrimat and he's a fan of its spartan head office he describes it as a 'shed'. Are you proud of that? You can't expect a quarry manager to work on a shoestring budget, and then he arrives at the head office where the carpets heat your feet from underneath when you walk on them. I think our office is functional and it will definitely not compete with the fancy financial institutions of Sandton. We are not shy to bring in a quarry manager that works out there in the bush . he won't feel that we're wasting the money that he's earning for us.

Have you bought enough companies to satisfy the business coming in? We developed a strategy a few years ago of exactly which assets we wanted to have and we found most of them. ... we are very happy with the portfolio that we have it can sustain our growth rates for at least another three or five years.

Have you said no to deals? Our hit rate is about one in 20. There's a significant amount of prospects we've turned down. Has that favoured you? Definitely. I always say I've never lost money on a deal I didn't do. Do you expect a few distressed assets coming to market? We're an open-pit mining company, and if you take that in its wider sense, we could see some interesting opportunities. If cement goes the route I think it's going to go, then there might be some distressed assets three or four years from now .

The whole mining sector has been under pressure for a while now and we might see a small coal mine or something come up for sale and it might be a good time to diversify. Where do you think the cement industry is headed? Somewhere nasty? I think so. Last year, cement players in SA sold about 12million tons, and the capacity is something like 15million. . At the growth rate that we see for the next three years, we will probably only have created the demand for that extra capacity by 2020 or even later.

Last modified on Thursday, 14 September 2017 15:33

My Account

2014
Murray & Roberts
Listed Construction Companies SA Construction News

Murray & Roberts

Murray & Roberts is South Africa’s leading engineering and construction services company. It has delivered infrastructure throughout South and Southern Africa for more than 110 years and is today recognised as an international engineering and construction…