Construction and engineering group Aveng continues to experience difficult trading conditions in line with general economic conditions of the group’s key markets of South Africa and Australia, Aveng group chairperson Angus Band told shareholders on Tuesday.

He said, in a continuation of the trends evidenced in the previous financial year, the South African market continued to be challenging owing to low levels of infrastructure-related spend and the impact of lower mining activities and labour disruptions, while trading conditions in Australia remained difficult with general social and infrastructure-related spend not yet compensating for reduced mining infrastructure spend.

“Despite these market challenges, the mining and manufacturing businesses, yet again, delivered solid performances, while the execution of the recovery and stabilisation plan continued to progress well,” Band noted.

He stated that the construction and engineering segment in South Africa and the rest of Africa remained constrained as a result of the lack of investment in infrastructure, adding that while the recovery and stabilisation process within Aveng Grinaker-LTA was progressing, the pace thereof was slower than planned.

“The completion of legacy contracts continues to negatively impact on current performance, [however], good progress is being made on the Nacala rail link, the Mall of the South and the Sasol corporate head office contracts.

“Given the soft trading conditions, it is pleasing to note that Aveng Grinaker-LTA was able to increase its order book by 15% from June 30 to September 30,” Band pointed out.

Meanwhile, with regard to Aveng’s Australasia and Asian construction and engineering segment, he said the completion of major multiyear mining and infrastructure contracts would result in lower revenue for the Australian business McConnell Dowell.

However, Band added that McConnell Dowell was pursuing opportunities in the general infrastructure environment.

Further, the Aveng businesses in South-East Asia and New Zealand continued to perform well.

Meanwhile, Band commented that Aveng’s mining business, Aveng Moolmans, assisted by efficiency initiatives to sustain operating margins, continued to deliver good results in light of the general downturn in the mining and commodity sector.

He stated that the Aveng Moolmans contracts had generally performed well with the Nkomati nickel mine contract starting operations during the first quarter of the financial year.

The Chuquicamata copper mine, in Chile, continued to receive attention at the highest level to resolve operational issues and settle outstanding claims.

Further, Aveng Manufacturing was performing well as a result of strong demand for concrete products, rail construction and maintenance services in Southern Africa, Band reported, adding that this operating group would continue to benefit from increased rail opportunities across Southern Africa.

However, Aveng Steel had been negatively impacted on by steel-sector labour disruptions and challenging market conditions, with no improvement in demand or prices expected to materialise in the financial year, he stated.

Band noted that the group’s order book had decreased by 2% from R37.2-billion at June 30 to R36.5-billion at September 30.

The Australasia and Asia construction and engineering business segment’s order book decreased by 9% to A$1.8-billion over the same period, while the South Africa and rest of Africa construction and engineering segment’s order book grew by 13% to R8.3-billion.

Aveng’s mining order book also increased by 13% between June 30 and September 30 to R9.7-billion, with South Africa in this regard gaining significantly relative to non-South African operations.

Meanwhile, with regard to Aveng’s recovery and stabilisation plan, Band pointed out that the company had, in September, successfully sold its Australiasian utilities business Electrix for R1.4-billion and had also placed a R2-billion senior unsecured convertible bond.

He added that the process of disposing of the majority of the group’s property portfolio in South Africa was also well advanced with the transaction expected to be finalised during the second half of the financial year.