Staying ahead

Posted On Friday, 01 February 2008 02:00 Published by
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It’s been just over a year since Afrimat, a supplier of building and construction materials throughout Southern Africa, listed on the JSE.

Construction IndustryThe success of the listing marked a pinnacle in the company’s history. From humble beginnings, the company has now entrenched itself as a leader and pioneer in the industry.

Afrimat CEO Andries van Heerden says that the company’s story is, in fact, the story of Prima and the Lancaster Group, two major players within SA’s construction industry.

Established in 1963, Prima was the brainchild of Christiaan du Toit, a grader operator who identified a market opportunity for aggregates. Upon his death, the Worcester-based crusher was taken over by his son Francois, and the younger Du Toit’s driven principles continue to influence the company today.

In 1979, Du Toit was joined by his brother-in-law Theunis Jordaan, whose administrative strengths were the perfect complement to Du Toit’s technical expertise. The duo later became a trio when, in 1985, civil engineer Peter Corbin came on board.

The company now entered into an interesting stage of development: Prima established Meng beton, a readymix cement company intended as a marketing channel for stone; and Boublok, which manufactured bricks from quarry waste products.

Prima also embarked on an acquisition drive that saw it consolidating its base through the purchase of quarries in Paarl, Caledon, Bredasdorp, Stanford and Robertson. Later, it set its sights on greenfields developments, establishing new quarries, including a site in Grabouw.

Though Prima was blazing a trail through the industry with a strategy which was, according to Van Heerden, “visionary for the time”, the Lancaster Group was also notching up impressive growth. The group had its roots in a Vryheid stone mine that was established in 1965 by brothers Gordon and Desmond Lemmon-Warde. The quarry grew rapidly, spurred by the development of the Richards Bay coal line. On the back of this expansion, the brothers decided to establish a second quarry in Ulundi.

This led to the formation of the second company within the Lancaster group, Lancaster Precast. Van Heerden says that the latter was created in 1973 to manufacture precast blocks from the quarry’s waste products in Vryheid.

Though Lancaster Quarries continues to enjoy significant growth — going on to purchase additional quarries in Harrismith, QwaQwa and Hluhluwe — the expansion of Lancaster Precast outstripped its sister company, with the result that it boasted twice the revenue and profit of the quarry business during the previous financial year. This success prompted Lancaster Precast to purchase factories in Harrismith, Ladysmith and QwaQwa. Additional factories were opened in Mkuze and Ulundi and four readymix plants were commissioned.

The link between Prima and the Lancaster Group was forged by Van Heerden. He had joined Prima as operations director in 2001 and was appointed managing director in 2003.

Chief among his achievements during this period was the empowerment transaction concluded between Prima and Mega Oils in 2003. The transaction saw Mega Oils acquire a 25,1% stake in Prima, and has been described by both sides as tremendously successful. “We have been blessed to find a partner who adds enormous value,” Van Heerden says.

Mega Oils’ Loyiso Dotwana, who is now a director at Afrimat, agrees that the transaction unlocked significant shareholder value. “At the time the transaction was made, Mega Oils was well aware of the impending boom in the construction industry, spurred by government’s extensive planning with regard to infrastructure,” he says, explaining the value he recognised in the potential partnership between the two companies. His insights were on target: Dotwana says that the basic principles of good business practice and corporate governance, coupled with a comprehensive knowledge of Afrimat’s business environment, have contributed to the partnerships’ ongoing success, while a team of industry leaders and empowerment shareholders that add real value continue to ensure that Afrimat stands out from competitors.

In spite of his passion and commitment to Prima, Van Heerden resigned in 2005, following a decision not to list the company on the JSE. But his dream was far from forgotten: later that year, he brought together a consortium, including empowerment partners Kwezi Mining, and purchased the Lancaster Group. In May 2006 an agreement was reached to merge Lancaster Group with Prima Quarries to form Afrimat, and by November that year, Van Heerden realised his listing ambitions.

More than meeting his expectations, the listing was something of a triumph for Afrimat. “The shares were oversubscribed 27,5 times, and we raised R125m,” he recalls. Initially priced at R5, the share price has since shown significant growth. Afrimat has also enjoyed significant growth in earnings per share, while the company’s balance sheet remains extremely strong.

This has placed Afrimat in a position for further expansion, which it has achieved through its acquisition of Malan’s and Denver quarries. The acquisition is doubly attractive, Van Heerden says. Not only does it grant Afrimat increased access to the Cape Town metropolitan area, but through a transaction between Malan’s and Denver quarries shortly before the acquisition, Afrimat now also holds assets formerly belonging to the latter in the mushrooming Port Elizabeth node.

The acquisitions and mergers that have taken place over the 40 years leading to Afrimat’s formation have placed the company in a particularly strong position. Today, Afrimat operates 22 quarries, two gravel mines, six sand mines, 19 readymix concrete plants, eight precast concrete bricks and blocks factories and a fleet of mobile crushing equipment. The company also offers transport, drilling and blasting services, with a fleet of 280 vehicles including earthmoving equipment, its own readymix trucks, contracted readymix trucks, tipper trucks, brick delivery trucks and cement tankers.

These resources have enabled Afrimat to entrench itself as a dominant player in the Western and Eastern Cape, KwaZulu Natal, the eastern Free State and Namibia.

“We have been blessed to find a partner who adds enormous value”

 

Last modified on Saturday, 12 October 2013 11:45

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