AFRIMAT has built a reputation over the years for being able to turn difficult assets around.
Time and again, the group has stepped into situations where others saw only distress or neglect, paid sensible prices, imposed discipline and then quietly extracted value. It is less a conventional mining and building materials business and more a listed turnaround specialist, operating with the mindset of a private equity house that just happens to own quarries, mines and cement kilns.
After an uncharacteristically poor 2025 financial year, when profits slumped by almost 90%, Afrimat’s interim 2026 results suggest the group is firmly putting that bruising period behind it. Revenue increased 29.9% to R5.3bn, operating profit rose 29.8% to R380m and headline earnings per share jumped 92.3% to 101.9c. On an annualised basis, the shares now trade on an earnings multiple just north of 20, indicating that the market expects the recovery to continue.
The group’s model is deceptively simple. Keep the portfolio diversified enough to ride out cycles, insist on tight cost control at every operation and deploy capital only where management believes it can materially improve performance. Construction materials, industrial minerals and bulk commodities each pull their weight at different times. When local construction stalls, mining sales provide support and vice versa.
The interim period was a good illustration of that balance. Bulk commodities, particularly iron ore, delivered a strong contribution, helped by a sharp increase in domestic volumes and steady international sales. But construction materials and cement accounted for more than half of revenue, underlining how much of Afrimat’s earnings power rests on the building and infrastructure sector. It also highlights why the successful turnaround of the assets purchased from Lafarge is so critical.
When Afrimat first announced the Lafarge deal, the scepticism was understandable. Cement is a notoriously tough business. Plants are capital intensive, energy costs are volatile and oversupply has haunted the South African market for years. Buying a set of troubled assets from a multinational looking to exit did not, on the face of it, scream “easy win”.
But management has made a career out of taking underperforming operations and applying what it calls “the Afrimat way”: tighter maintenance, better logistics, stricter working capital control and a relentless focus on service levels. In the interim commentary, the company notes that the Lafarge businesses have now been fully integrated into Afrimat’s structures and that good progress has been made with the turnaround, with the benefits of these interventions starting to show.
The early evidence is encouraging. In aggregates, for example, the former Lafarge quarries have regained lost market share simply by improving product availability and customer service.
Cement is the bigger prize. Revenue from the cement business jumped 118.8% to R874m, albeit from a low base, and the division remains loss-making at an operating level. But plant reliability improved markedly towards the end of the period, with fewer disruptions and better throughput. In heavy industry, reliability translates into margin gains as a stable kiln allows fixed costs to be spread over more tons.
Afrimat’s approach is pragmatic. It is not trying to reinvent cement manufacturing. Instead, it is focusing on low-cost production, blending and packaging efficiencies, and leveraging profitable fly-ash extenders to create competitively priced, lower-carbon products. The grinding and blending plants are already profitable; once the Lichtenburg factory consistently runs as intended, the economics should improve sharply. If the division merely breaks even, the hit to profits disappears. If it earns a normal industrial return, the uplift could be material.
There are, of course, trade-offs. The Lafarge acquisition has pushed up debt and finance costs, making the balance sheet less conservative than it once was. But cash generation is improving, and management has already flagged asset disposals and working capital discipline to accelerate deleveraging. Historically, Afrimat has been cautious with leverage, which suggests this is a temporary bulge.
Ferrochrome risk
One of the more immediate risks on the horizon is the potential closure of ferrochrome smelters in South Africa, which would directly affect demand for anthracite from the Nkomati mine.
Management has acknowledged this risk and is actively evaluating alternative options, such as increased exports, to secure the mine’s future.
Encouragingly, the ferrochrome industry and the government are engaged in discussions aimed at achieving more sustainable electricity tariffs — a necessary step if domestic smelting capacity is to remain competitive.
What continues to set Afrimat apart is cost discipline, operational execution and the ability to identify undervalued assets with genuine turnaround potential. While it is likely to take time to fully digest the Lafarge acquisition before any further large transactions are contemplated, management has built a strong track record as an effective capital allocator.
For investors, the attraction lies in the steady compounding of that approach over many years. If history is any guide, betting against management has rarely paid off.
This article first appeared in the Financial Mail.
