Diversified industrial group Afrimat, whose interests span open-pit mining to the supply of construction materials, says it is counting the costs of the Transnet strike, which had a ripple effect on its customers.
Andries van Heerden, CEO of the Cape Town-based group, said recent disruption caused by the Transnet pay strike had a crippling effect on its sales and illustrated how “exposed we are as a country to Transnet”.
“In our iron-ore business we did not move a single tonne during that period,” Van Heerden said. “So we lost two weeks of sales completely because of their underperformance.”
Last week, Afrimat reported operating profit fell lowered 12.1% to R512.2m from R582.8m last year and headline earnings per ordinary share dropped 14.5% to 252.2c.
The group attributed the drop from the prior windfall year to the effect of poor market sentiment, inflationary cost pressures affecting margins, Eskom electricity supply interruptions and constraints as well as mounting concern over global recession.
Afrimat had previously cautioned shareholders that its interim earnings would fall as much as 20% due to lower iron-ore prices and higher production costs, warning that the strike at Transnet would affect the export and inland logistics for its iron-ore mines.
The rail monopoly’s impasse with trade unions on pay increases led to a 12-day national strike, which according to the SA Association of Freight Forwarders, caused SA to lose the opportunity to move R65.3bn worth of goods.
A complete return to normality is expected only in 2023.
The cost of the Transnet strike will only reflect on Afrimat’s bottom line at the end of the next quarter, while major miners are expected to report the effect of the strike in the coming weeks.
Kumba Iron Ore, SA’s largest iron producer, has lowered its full-year export guidance about 6% as a result of the Transnet strike and other disruption of the rail and port operator’s services.
Van Heerden said that in the bulk commodities side, one of Afrimat’s biggest clients — ArcelorMittal the world’s second-largest steel producer — had seen its operations battered by supply chain disruption.
He said the construction sector continued to bemoan the slow rollout of government projects aimed at bolstering activity in the sector again.
“There is big concern about a lack of spending on infrastructure and that the roads are deteriorating quite fast,” said Van Heerden.
The 16-year-old JSE-listed company supplies a range of products to local and international markets through its three segments: construction materials, industrial minerals and bulk commodities.
Afrimat’s share price was little changed at R47 on Friday, having slipped just more than 18% since the beginning of the year.
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