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Jul 13, 2012

M&R plots growth plan as recovery year comes to a close

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Construction group Murray & Roberts (M&R) is ready to implement a two-year, board-approved growth programme starting this new financial year, following the completion of a year-long recovery strategy which has seen the resolution of what CEO Henry Laas terms “several challenging projects”.

The group earlier this year reported a R528-million loss for the six months ended December 31.

Laas says that “work is basically complete” on the Australian Gorgon Pioneer Material Offloading Facility project, which he describes as a major former cashdrain on the group. M&R is currently demobilising from the site.

A claims resolution process on this project is in progress, and the company is “satisfied with how it is progressing”, he notes.

The final link of the Gautrain project, in Gauteng, finally opened in June following nine-month-long remedial work to the tunnel owing to water ingress.

However, Laas says the dispute on the interpretation of tunnel water specifications in accordance with the concession agreement with the Gauteng provincial government remains.

M&R forms part of the Bombela consortium responsible for building and operating the rapid rail link.
Arbitration on the water issue is expected to start in September, says Laas.

As the outcome is uncertain, M&R may still incur further costs on this con- tract, as the group could be forced to return to the tunnel between Rosebank and Part stations for further remedial work, he adds.

Bombela’s larger Gautrain delay and disruption claim against government is continuing, with resolution expected only in 2014.

Issues around Eskom’s Medupi power station have also been resolved through an in-principle agreement with the State-owned power utility.

Laas is also pleased that M&R finally has an agreement, again in principle, with a prospective buyer for its remaining steel business, with the company “hope- fully” closing the sale before its financial results are announced in August.

More good news is that M&R’s order book remains strong at more than R50-billion.

Mixed Mining Outlook
Looking at the mining business speci- fically, Laas is pleased about growth achieved in the South-East Asian, Australian and Canadian markets, with the South African platinum sector less of a star performer. A depressed platinum market has already taken casualties, with two major local shafts placed on care and mainte- nance in recent weeks.

Laas notes that M&R is “making good progress” in diversifying into other mining sectors.

As for the local construction sector, the company boss is hopeful of some recovery in the short to medium term.

He notes that it is still “tough out there”, with margins highly competitive “and low”.

However, he expects that M&R’s construction business will show “a significant improvement” going forward, as all major lossmaking projects have now been wrapped up.

Laas adds that M&R has determined that its earlier provision for possible penalties under the Competition Commission investigation into collusion in the local construction industry has been sufficient, with the commission giving an indication of a fine above the minimum range of the provision, and below the maximum range.

“Hopefully, we will reach a settlement soon.”

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
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