by Nick Hedley, 20 November 2013, 18:52

CONSTRUCTION materials company Sephaku Holdings on Wednesday reported its first profits from operations since shifting its focus to cement and building materials.

For the six months ended September, Sephaku reported diluted headline earnings per share of 2.64c, from a 5.13c loss previously, thanks to the recent acquisition of Metier Mixed Concrete.

Metier’s inclusion saw Sephaku’s revenue rising from zero in the prior interim period to R301.6m. Group operating profit was R33.8m from an operating loss of R10.1m.

While Sephaku has reported profits previously, these were on the sale of exploration assets which the group improved and then sold.

Financial director Neil Crafford-Lazarus said Metier, which was acquired at the end of February, increased its concrete sales by 35% during the period, mainly because of Metier’s entrance into the Gauteng market. Metier now has three operational plants in Gauteng, although the group is looking to add more.

Mr Crafford-Lazarus said another Gauteng plant could offset the negative effect of the upcoming builders holiday.

Meanwhile, Sephaku will soon become a new entrant to the South African cement manufacturing industry, with construction of plants under associate company Sephaku Cement nearing completion.

Sephaku holds a 36% share of Sephaku Cement, which is developing two cement production plants — in the North West and Mpumalanga.

The remaining 64% of Sephaku Cement is held by Dangote Cement.

Sephaku Cement CEO Pieter Fourie said the Delmas plant in Mpumalanga was expected to start producing cement in January 2014, while the Aganang facility in the North West was on track for production to start in the second quarter of 2014. Construction was going according to budget, he said.

The plants were expected to have a combined production capacity of 2.5-million tonnes a year, which would give Sephaku Cement “the capacity that will allow us to have a market share of between 15%-20% of the South African market”, Mr Fourie said.

“We have taken the view on entering the market on a long-term, sustainable growth basis.

“We believe in a developing country with infrastructure spend requirements such as South Africa, there’s certainly reason for a 4.5%-5% long-term growth potential,” he said.

Mr Fourie said there was scope for sustainable growth after a low point in the industry in 2009 “and we believe our timing is right getting into the market”.

He said there were already a few infrastructure projects on the go, mainly on roads, which benefited cement producers.

Sephaku CEO Lelau Mohuba said Metier was “set to expand its market share” in Gauteng in 12-18 months.

It changed its financial year-end from June 30 to March 31, resulting in the comparative interim reporting period being the six months ended December 2012.

Sephaku shares rallied 3.16% to an intra-day high of R5.88 on Wednesday, before closing 1.75% up higher at R5.80.