There has been much recent copy in the FM on general mining mid-cap Afrimat, a fast-moving and popular investor stock. This update follows a visit by IM to Afrimat’s problem child, the cement plant in Lichtenburg.
Year to date Afrimat’s share has slumped 46% as a slew of woes, many not directly of management’s doing, led to a dive in earnings over the past 12 months, rattling investor confidence in the highly regarded executive team.
Afrimat, known for its ability to acquire solid but run-down assets and resurrect them into efficient, profitable entities, has had a series of missteps and many in the market ponder if management simply took on too much. The acquisition of construction materials and cement business Lafarge in June 2023 was hailed at the time as “the deal of the decade”.
The combination of the Afrimat and Lafarge quarrying assets, on paper, would lead to an unassailable market position. The Lafarge cement asset had quality plant but had lost its way. When the deal was consummated, all seemed positive given the R1bn acquisition cost.
What scuppered the plan was the delay of nearly a year in approval of the transaction by the competition authorities. In this period, cement was left to rot as Lafarge ignored the asset held for sale. When Afrimat took operational control in April 2024, cement was a mess. A lack of maintenance and a loss of staff had seen the cement business crack.
Not even the vaunted Afrimat touch could fend off losses in the first year of R285m, which unnerved the market. It was already unsettled by the way group deal debt had soared from 1.4% gearing to 50%, or R1.66bn. The debt pile saw finance costs bloat 187% to R221m in the year. There is little expectation for a material degear until mid-2026.
The latest results also saw the impact of softer iron ore prices and the hangover of disruption with the ArcelorMittal South Africa supply agreement in H1 2024. This caused iron ore profits to dive 70% to R238m.
Further woes piled up. Mining geology setbacks at Nkomati Anthracite, problems with the Maputo export channel and a slide in domestic smelter demand saw profits slide 71% to R46.8m. The late-2021 acquisition of phosphates business Glenover, in which R80m of shareholder funds were sunk, also weighed.
With ongoing delays in restoring cement to break-even and the market not assuming any material earnings recovery until at least H2 2026, the share price started to tank. The Afrimat capital markets day on June 11 did not aid investor confidence; the Public Investment Corp, a major shareholder, started to bail out, leading to an avalanche of investor selling. Afrimat fell by a third.
The well-attended site visit to Lichtenburg on September 10 and the accompanying management presentation underlined the material remediation work that has been done to get the plant to be semireliable
The well-attended site visit to Lichtenburg on September 10 and the accompanying management presentation underlined the material remediation work that has been done to get the plant to be semireliable. This created some investor comfort.
There is still much to do. The plant is not yet running like a purring engine and utilisation remains sub-par, adding to costs. To generate returns that would please the market, clinker production of about 1Mt needs to rise 50% and utilisation should increase 33%.
There is strong appetite for Afrimat’s innovative, affordable blended cement — it’s Afrimat’s “secret sauce”. However, delivering on that ambition may be 12 months away.
Afrimat has seemingly broken the back of the cement plant problems. There is significant potential for the product but the market remains cut-throat. Whether Afrimat has the stomach to remain an entrenched player remains in doubt. Having paid the equivalent of $53m for Lafarge, flipping this asset could generate more than $100m, leaving the construction materials business and fly ash assets as the profitable deal cream.
In the meantime, bright spots include the construction materials division, which is faring well. The iron ore price has recovered 10% from its 2025 lows, back now at $105/t, though the stronger rand has removed some shine. Nkomati should have an improved second half but anthracite remains challenging, as does Glenover phosphates, which might recover by mid-2026.
Afrimat will see a material improvement in forthcoming interim results to August but nowhere near enough to placate the market. Similarly, 2026 earnings will surge above the low previous-year performance, but will still be far off past levels. Until there is tangible evidence that cement losses have abated and profits are on the horizon, Afrimat will languish.
IM believes Afrimat’s share price may be near its floor — even though there is an inclination to bottom fish until clarity of cement, earnings recovery and degearing is evident. Investors will need patience, as currently the Afrimat share is wearing concrete boots.
The writer holds shares in Afrimat
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