Interim results for the six months ended 31 August 2018 1 5 November 2018
Core message Strategically diversified to prosper in a tough environment Afrimat Limited Interim results for the six months ended 31 August 2018 1
Summary of the period Diversification, into bulk commodities (iron ore) started to deliver excellent results Industrial minerals continue to show resilience due to exceptional product quality Construction materials and aggregates businesses under pressure due to economy US$ Rand hedge from iron ore and Mozambique Importance of a balanced portfolio
Group overview A supplier of quality materials sourced from our open pit mines and quarries Strategically diversified through product range, target market and location Afrimat Limited Interim results for the six months ended 31 August 2018 3
Operational overview What we do
What we do BULK COMMODITIES CONSTRUCTION MATERIALS INDUSTRIAL MINERALS Aggregates and Concrete Based Products - combined into a single operating segment, named Construction Materials Industrial Minerals - reflected as a separate segment Afrimat Limited Interim results for the six months ended 31 August 2018 5
Bulk commodities Iron ore
Industrial minerals Lime Metallurgical dolomite Silica Afrimat Limited Interim results for the six months ended 31 August 2018 7
Construction materials: aggregates Quarrying products Concrete stone Road stone Other aggregates
Construction materials: concrete products Bricks Blocks Paving blocks Readymix concrete Afrimat Limited Interim results for the six months ended 31 August 2018 9
Diversified portfolio and footprint which generates a balanced, consistent income stream Construction Materials 24 Commercial quarries 6 Sand & gravel mines 4 Clinker sources Mobile crushing & screening Drilling & blasting 7 Concrete brick & block factories 18 Readymix batching sites Limpopo 1 2 Mozambique Gauteng 2 3 1 Industrial Minerals Mpumalanga 1 3 2 Limestone mines 4 Dolomite mines 1 Silica mine Northern Cape 1 1 Free State 7 South Africa KwaZulu-Natal 16 Commodities Eastern Cape 1 1 Iron ore and manganese mine Western Cape 3 24
What makes Afrimat different? Company positioning Company culture Strategic management Afrimat Limited Interim results for the six months ended 31 August 2018 11
Company positioning Primarily focused on mid-tier open pit mining Unique competitive advantage Geographic location Unique metallurgy Structural cost advantage Highly entrepreneurial culture Hedged against economic volatility through wide diversification
Company culture Consistently delivering Strong operational efficiency The right people in the right positions Synergistic teamwork Customer advocacy through service, reliability and quality of supply Values based entrepreneurial culture Afrimat Limited Interim results for the six months ended 31 August 2018 13
Strategic management Companywide understanding of desired future Fundamental understanding of market Good understanding of own abilities Continuous research of business environment Facing the brutal facts Meticulous strategy execution Financial discipline: making the returns
Our performance What the diversification strategy is delivering Afrimat Limited Interim results for the six months ended 31 August 2018 15
Headline earnings per share (HEPS) comparison 5,00 4,00 -- Afrimat 3,00 2,00 1,00 0,00-1,00 -- Raubex -- Sephaku -- PPC -- CIL -2,00 2010 2011 2012 2013 2014 2015 2016 2017 2018
Growth through diversification Profit history with and without acquisitions 200 180 160 140 120 100 80 60 40 20 0 Positive value gap 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Glen Douglas Clinker Infrasors Cape Lime Demaneng Headline earnings per share Reality without strategic acquisitions Afrimat Limited Interim results for the six months ended 31 August 2018 17
Financial overview 28.6% 4.3% 93.6 cents Group revenue increased to R1.5bn Operating profit up to R207.7m Headline earnings per share 943 cents 19.0 cents 20.1% NAV per share Interim dividend per share held Return on net operating assets
Financial overview Revenue and contribution Revenue (R 000) Contribution from operations (R 000) Contribution from operations margin 13,3% 3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 968 502 1 030 098 966 549 1 003 237 1 074 899 1 153 258 1 272 190 1 184 592 28,6% 1 522 835 450 000 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 146 400 127 349 160 765 160 923 203 492 202 109 157 294 194 504 4,2% 202 669 0 2015 2016 2017 2018 2019 0 2015 2016 2017 2018 2019 1st half 2nd half 1st half 2nd half Afrimat Limited Interim results for the six months ended 31 August 2018 19
Headline earnings per share interim 120,0 100,0 80,0 Cents per share 60,0 40,0 61,1 76,0 95,2 102,2 93,6 20,0 0,0 2014 2015 2016 2017 2018
Financial overview Contribution from operations split (%) HY2018 HY2017 Construction materials 56.6% 76.1% Bulk commodities 24.7% (2.8%) Industrial minerals 20.5% 28.0% Services (1.8%) (1.3%) Contribution from operations margin (%) HY2018 HY2017 Construction materials 13.2% 16.9% Bulk commodities 13.6% (18.9%) Industrial minerals 14.6% 19.4% Services 13.3% 16.4% Afrimat Limited Interim results for the six months ended 31 August 2018 21
Net cash from operating activities CAGR of 18.27% 2014-2018 160 000 140 000 120 100 145 505 90000 80000 Cents per share 120 000 100 000 80 000 60 000 74 374 98 938 113 748 79 510 70000 60000 50000 40000 30000 40 000 20 000 40 590 20000 10000-2014 2015 2016 2017 2018 0
Statement of financial position - assets R 000 Unaudited Aug 2018 Unaudited Aug 2017 Audited Feb 2018 Property, plant and equipment 1 451 475 1 413 259 1 417 845 Mining rights and goodwill 243 173 244 745 243 970 Inventories 289 498 229 760 242 124 Trade and other receivables 444 749 405 450 391 603 Cash 164 945 135 594 112 208 Other assets / BEE funding 118 961 111 621 126 965 2 712 801 2 540 429 2 534 715 Demaneng accounts for R316.8 million Afrimat Limited Interim results for the six months ended 31 August 2018 23
Statement of financial position - equities & liabilities R 000 Unaudited Aug 2018 Unaudited Aug 2017 Audited Feb 2018 Total equity 1 297 368 1 158 788 1 229 320 Borrowings 463 874 486 158 436 958 Provisions 135 782 121 363 130 288 Overdraft 148 496 60 200 90 203 Trade and other payables 440 363 409 007 402 541 Other liabilities / deferred tax 226 918 304 913 245 405 2 712 801 2 540 429 2 534 715 Net debt less cash:equity 35.4%
Capital expenditure F2018 Planned F2019 H1: R115.8 m H2: R 67.0 m R182.8 m H1: R115.8 m H2: R 88.3 m R204.1 m Demaneng ramp-up Includes R43.5 million for rental replacement capital General maintenance Afrimat Limited Interim results for the six months ended 31 August 2018 25
Dividend payment Interim dividend 2.7x cover 25 20 20 20 19 CAGR of 9,95% 2014-2018 Record date: Fri 30 Nov 2018 Dividend payable: Mon 3 Dec 2018 Cents per share 15 10 5-13 16 2014 2015 2016 2017 2018
Segmental makeup Better reflects overall business INDUSTRIAL MINERALS CONSTRUCTION MATERIALS BULK COMMODITIES Industrial minerals Aggregates Iron Ore (Demaneng) Bricks and blocks Readymix concrete Afrimat Limited Interim results for the six months ended 31 August 2018 27
Segmental revenue 57,1% + 24,2% + 18,7% = 100% R1 522 835 R 000 R870 149 R368 363 R284 323 Construction Materials Bulk Commodities Industrial Minerals Total
Operational overview Well diversified contribution from operations August 2018 August 2017* Cape Lime 9% Traditional business 25% Cape Lime 11% Traditional business 29% Clinker Group 16% Clinker Group 23% Infrasors 12% Glen Douglas 13% Demaneng; 25% Infrasors 21% Glen Douglas 16% * Excluding Demaneng loss of R5.5 million Afrimat Limited Interim results for the six months ended 31 August 2018 29
Our market Purposeful exposure to sectors with economic fundamentals that suit the Afrimat business model
Contribution to revenue 24,2% Iron ore Why we are excited Afrimat Limited Interim results for the six months ended 31 August 2018 31
Afrimat acquisition of Demaneng Iron ore market
120 100 80 60 40 20 Pricing trends 0 Historical Index Pricing Afrimat Limited Interim results for the six months ended 31 August 2018 33 01-Mar-15 01-Apr-15 01-May-15 01-Jun-15 01-Jul-15 01-Aug-15 01-Sep-15 01-Oct-15 01-Nov-15 01-Dec-15 01-Jan-16 01-Feb-16 01-Mar-16 01-Apr-16 01-May-16 01-Jun-16 01-Jul-16 01-Aug-16 01-Sep-16 01-Oct-16 01-Nov-16 01-Dec-16 01-Jan-17 01-Feb-17 01-Mar-17 01-Apr-17 01-May-17 01-Jun-17 01-Jul-17 01-Aug-17 01-Sep-17 01-Oct-17 01-Nov-17 01-Dec-17 01-Jan-18 01-Feb-18 01-Mar-18 01-Apr-18 01-May-18 01-Jun-18 01-Jul-18 01-Aug-18 58% 62% 65%
40 30 20 10 0-10 -20-30 -40-50 Preference for quality 01-Mar-15 01-Apr-15 01-May-15 01-Jun-15 01-Jul-15 01-Aug-15 01-Sep-15 01-Oct-15 01-Nov-15 01-Dec-15 01-Jan-16 01-Feb-16 01-Mar-16 01-Apr-16 01-May-16 01-Jun-16 01-Jul-16 01-Aug-16 01-Sep-16 01-Oct-16 01-Nov-16 01-Dec-16 01-Jan-17 01-Feb-17 01-Mar-17 01-Apr-17 01-May-17 01-Jun-17 01-Jul-17 01-Aug-17 01-Sep-17 01-Oct-17 01-Nov-17 01-Dec-17 01-Jan-18 01-Feb-18 01-Mar-18 01-Apr-18 01-May-18 01-Jun-18 01-Jul-18 01-Aug-18 58% Discount 62% 65% Premium
0,45 0,4 0,35 0,3 0,25 0,2 0,15 0,1 0,05 Lump premium 0 Afrimat Limited Interim results for the six months ended 31 August 2018 35 01-Mar-15 01-Apr-15 01-May-15 01-Jun-15 01-Jul-15 01-Aug-15 01-Sep-15 01-Oct-15 01-Nov-15 01-Dec-15 01-Jan-16 01-Feb-16 01-Mar-16 01-Apr-16 01-May-16 01-Jun-16 01-Jul-16 01-Aug-16 01-Sep-16 01-Oct-16 01-Nov-16 01-Dec-16 01-Jan-17 01-Feb-17 01-Mar-17 01-Apr-17 01-May-17 01-Jun-17 01-Jul-17 01-Aug-17 01-Sep-17 01-Oct-17 01-Nov-17 01-Dec-17 01-Jan-18 01-Feb-18 01-Mar-18 01-Apr-18 01-May-18 01-Jun-18 01-Jul-18 01-Aug-18 01-Sep-18 01-Oct-18 Lump Premium
Iron Ore Average Production Cost FOR (Free on Rail): R 399.28/ton Transnet rail quota on line t/pa Original total 1 000 000 Transnet cut back to 570 000 Negotiated (export line) 300 000 Current total through Saldanha 870 000
Iron ore story line 1. Rationale $ exposure Much higher margins through the cycle Excellent operational fit Accessible opportunities Afrimat Limited Interim results for the six months ended 31 August 2018 37
Iron ore story line (continued) 2. Competitive advantage Quality Fe content Low silica content Low alumina High lump ratio 70/30 Cost Low strip ratio 1:1 Own load-out station Close to load-out station 3.3 km Operate mine as a quarry (cost conscious and scalability) Logistics Export rail capacity (870 ktpa) Own load-out station Good relationships with Transnet Access to domestic rail lines Management expertise
Iron ore sales by rail 80 000 Planned Transnet maintenance shut down 75 281 70 000 65 244 66 000 60 000 50 000 45 392 45 758 45 743 45 225 57 172 58 463 53 000 40 000 30 000 20 000 28 629 30 643 26 813 22 715 30 282 10 000 0 Sales Afrimat Limited Interim results for the six months ended 31 August 2018 39
Contribution to revenue 18,7% Industrial minerals Stable market
Industrial minerals: rationale Good margins Constant off-take: long term agreements High entry barriers Alternatives are scarce Good market: high volumes Reputable customers Afrimat Limited Interim results for the six months ended 31 August 2018 41
Industrial minerals: the market Glass - Bottles - Windscreens - Plate glass Metallurgical - Alloys - Chrome - Steel - Foundries Chemical Water treatment - Drinking water - Acid mine drainage Agriculture - Soil ph stabilisation - Animal hygiene Industrial powders and fillers - Fire retardants - Paints - Tiles and tile adhesives - Grout fillers
Industrial minerals: our positioning Portfolio of products - Customised offering Geographic spread Innovative product development Partnering with customers Solving the customer s pain points Afrimat Limited Interim results for the six months ended 31 August 2018 43
Contribution to revenue 57,1% Construction materials A good cash cow
Construction materials: period under review Felt brunt of economic slow-down KwaZulu-Natal and Gauteng businesses impacted the most Solid performance from Western Cape aggregates business Mozambique business ramped up through supply contract for re-settlement village Emfuleni Clinker dump acquisition adds 3 4 years LOM Afrimat Limited Interim results for the six months ended 31 August 2018 45
Afrimat Construction Index 2 nd quarter 2108 135 130 Index; Q1 2011=100 125 120 115 110 105 100 95
Building plans passed Real value of recorded building plans passed by larger municipalities Constant 2015 prices (Source: Stas SA, July 2018, P504.1) Afrimat Limited Interim results for the six months ended 31 August 2018 47
SANRAL: Road condition (21 489 km) 10000 9000 8940 (41.6%) 8000 7629 (35.5%) 7000 6000 Km 5000 4000 3695 (17.2%) 3000 2000 1000 1139 (5.3%) 86 (0.4%) 0 Very good Good Fair Poor Very poor (Data from BIFSA, 20 September 2018, p.19)
Provincial: Road condition (48 942 km) 16000 14000 13995 (28.6%) 12000 10000 Km 8000 6000 8272 (16.9%) 10914 (22.3%) 10132 (20.7%) 5629 (11.5%) 4000 2000 0 Very good Good Fair Poor Very poor (Data from BIFSA, 20 September 2018, p.19) Afrimat Limited Interim results for the six months ended 31 August 2018 49
Provincial and national road expenditure and estimates 60 000 Road Expenditures (R million) (Source: Data from: BIFSA, Roads Review 2018, p.26). 50 000 40 000 30 000 20 000 10 000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f Total Provincial SANRAL Total Provincial and SANRAL
Estimated provincial expenditure on construction and maintenance of roads 25000 20000 15000 R mill 10000 5000 0 KZN WC GP MP EC LMP NWP FS NC 2019 2020 2021 MTEF (Source: Data from BIFSA, 20 September 2018, p.33). Medium Term Expenditure Framework ( MTEF ) Afrimat Limited Interim results for the six months ended 31 August 2018 51
Looking ahead Why are we excited on how we approach the environment
Human Resources Development 1. Learnerships (Based on figures from 2014) - 75 learners in total - Of the 19 that has passed, 12 were employed) History of Afrimat Learnerships 50 45 40 35 NUMBER 30 25 20 15 10 5 0 50 19 6 In Progress Dropped Out Passed 54 Afrimat Limited Interim results for the six months ended 31 August 2018 53
Human Resources Development 2. Afrimat Graduate Development Program - Consists of interns, Graduates in Training, Practical training 1/2 Afrimat Graduate Development Program 30 25 11 20 12 TOTAL 15 7 10 12 14 18 5 0 2016 2017 2018 YEAR Male Female 55
Human Resources Development 2. Strategic Development Study Assistance - Includes Certificates, Diplomas, Degrees, Honours and MBA s Study Assistance 45 40 TOTAL 35 30 25 20 19 24 23 15 10 17 18 20 5 0 2016 2017 2018 YEAR Male Female 56 Afrimat Limited Interim results for the six months ended 31 August 2018 55
Snapshot of Local Economic Development projects through the years Youth skills development/ Job creation Trackless Mobile Machines (TMM) training for over 80 unemployed youth Funding for retail/chain store training for over 100 unemployed youth - in partnership with 68 retail/chain stores Over 200 unemployed youth trained - Code 10/14 drivers license Over 40 jobs created through Local SMMEs in local communities Education Funding for a Maths teacher (10 years) Top student awards programme (10years) Maths & Science programmes in 6 schools across the country (5 years) School/Toy Libraries (1) Infrastructure Early Childhood Development Centres ( 3) Multi Purpose Centres (1) Centre for Disabled children (1) Over 40 Classrooms built 10 Market Stalls for local SMMEs 1 Economic Hub for local SMMEs Supplying water to several communities
Looking ahead Iron ore business to perform well Industrial Minerals to grow Construction materials to remain at present levels Good cash flow Afrimat Limited Interim results for the six months ended 31 August 2018 57
How to assess Afrimat Efficient hedge (against volatile local business conditions) Cash generative / free cash flow focus Moat (geographic locations, unique metallurgy & structural cost advantage) Strength of management Rand hedge (Iron ore & Mozambique) Operational diversification Scalability reduces cyclicality (protects against commodity price fluctuations) Dividend payer (2,7x cover)
Risk mitigation SA country risk Volatile commodity markets Construction industry pressure Macro economic threats Afrimat Limited Interim results for the six months ended 31 August 2018 59
Core message Strategically diversified to prosper in a tough environment
Q & A Thank you for your attendance and participation For any further Investor Relations questions please contact: Andries van Heerden (CEO) 021 917 8840 Vanessa Rech (Keyter Rech Investor Solutions) 087 351 3814 www.afrimat.co.za Afrimat Limited Interim results for the six months ended 31 August 2018 61