http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.05Change: 0.09
R/$ = 11.82Change: -0.08
Au 1202.86 $/ozChange: 1.20
Pt 1182.50 $/ozChange: 4.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Sep 14, 2012

For the first time, contractor earns more abroad than at home

Back
Construction|Engineering|Africa|Flow|Mining|PROJECT|Projects|Renewable Energy|Renewable-Energy|Resources|Roads|South African National Roads Agency Limited|Transnet|Africa|Australia|South Africa|Big Mining Groups|Energy|Flow|Maintenance|Louwtjie Nel|Wilson Bayly Holmes Ovcon|The 2010 World Cup
Construction|Engineering|Africa|Flow|Mining|PROJECT|Projects|Renewable Energy|Renewable-Energy|Resources|Roads|Transnet|Africa||Energy|Flow|Maintenance||
construction|engineering|africa-company|flow-company|mining|project|projects|renewable-energy|renewable-energy-company|resources|roads|south-african-national-roads-agency-limited|transnet|africa|australia-country|south-africa|big-mining-groups|energy|flow-industry-term|maintenance|louwtjie-nel|wilson-bayly-holmes-ovcon-person|the-2010-world-cup
© Reuse this



Wilson Bayly Holmes Ovcon (WBHO) earned around 60% of its 2012 financial year revenue outside South Africa, says CEO Louwtjie Nel, up from 52% in the previous financial year, which was the first time in the 41-year history of the construction group that the bulk of its revenue was generated outside the country.

WBHO revenue for the year ended June 30 increased by 21.2%, from R14.8-billion in the previous year to R17.9-billion. Profit for the year dropped 9.6% to R713-million. The operating margin declined from 7.4% to 5.5%.

Nel regards the slow place of South African-related revenue growth as “disappointing, as this is home, and this is where we want to be, but we have to go where the work is”.

The company’s future South African earnings “will not be going much lower. We are pretty much in good balance now”.

However, Nel also notes that WBHO does not have a strategy to earn a certain percentage of its revenue in a certain geographic area – “our strategy is to find the best work we can”.

The current WBHO order book comprises 67% of foreign projects, with the balance of work located in South Africa. The order book for the group as at July 1 was R20.9-billion, compared with R16.2-billion as at July 1, 2011 – an increase of R4.6-billion.

“There is a big order book in Australia at the moment,” says Nel.

The negative effect of doing so much business in Australia, however, is that margins are tight there. Nel is hopeful of some improvement going forward.

With big mining groups also cutting down on capital expenditure as global financial jitters continue to spread, Nel admits that WBHO’s exposure to Australia is “a risk” for the company.

He points out, though, that the group is only “a small player” in Australia’s mining industry, involved largely in upgrade and maintenance projects.

“We just upgraded from our bakkie. We have a lot of potential. We are not an engineering, procurement and construction contractor in that field.”

Nel says he can imagine the Australian resources boom potentially cooling down, but that WBHO is confident of a “reasonable run” as it can still secure some market share from the “big guys”.

As for the local market, Nel believes that some segments have bottomed out, with a slight improvement in margins, but notes that it will “take a long time to really come back – in the short term, we don’t expect it to improve much”.

WBHO will “do well to stay in the 5% to 6% [margin] bracket”, he adds, especially as Australia has traditionally been “below 3%.”

Nel says the local construction industry has probably been somewhat “spoilt” by the boom in the run-up to the 2010 World Cup, with contractor margins after tax before this “always” between 3% and 4% – a level the market is again closing in on.

“There is potential in South Africa. We can see the work coming in from the private sector and a little bit on the South African National Roads Agency Limited (Sanral) and Transnet side.”

He adds that the private sector is “keeping most of the contractors alive at the moment”, with the industry still in a bit “of a survivalist mode”.

However, Nel notes that WBHO is also a bit “more bullish” on government spend than a year ago.

“We see two . . . three new tenders floating through our offices each week for roads, either provincial or for Sanral. “We have a lot of pipeline work on the go. If these renewable-energy projects go, it will make a huge difference.”

He says the potential work from Transnet also seems promising, but that this is still “a year away”.

Nel says he is hopeful of enough public-sector work coming to market so that “everyone could get a fair share”.

“I think we have to be patient and, in about a year to 18 months, we we will hopefully really see the work flow through and then we can get going again.”

Free State Roads Update A problem area for WBHO in the past financial year has been nonpayment on a Free State government roads project, which saw work suspended in October 2011.

However, Nel says WBHO has reached a settlement with the provincial government and that work on the project will restart once payment is received.

He says the company has reached a payment agreement “in writing” in a settlement process which has also involved the National Treasury. WBHO received “a small portion” of the payment owing to the company at the beginning of August.

Nel does not want to release the quantum of money WBHO is to be paid, saying only that he is confident the company will get 100% of the “finally negotiated sum”.

“We think we got a fair deal.”

As for another thorny issue, namely the South African Competition Commission’s investigation into collusion in the local construction industry, Nel says WBHO has provided for possible penalties in this long-running process, unlike last year, as it now “has a better idea what that provision should be”.

Nel says the group hopes for finality on the issue in the “next two to three months”.

He does not want to quantify the value of the provision as WBHO has not yet agreed on this with the Competition Commission, saying only that the group has provided for its “best estimate” of the settlement amount.

Edited by: Martin Zhuwakinyu
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other News This Week News
Walter Hill
Eqstra Holdings was going to reduce its exposure to contract mining, but it was not yet ready to sell the troubled business, said CEO Walter Hill on Tuesday. He said Eqstra would not sell its contract mining business in a “depressed market”. He said it would be...
Subscribe to Engineering News and Mining Weekly for two years, but only pay for the first year.  The weekly editions of Engineering News and Mining Weekly will be posted to your preferred postal address and also gain access to:
National flag carrier South African Airways (SAA) is in an advanced stage of renegotiating its deal with European airliner manufacturer Airbus to acquire A320 single-aisle (or narrow body) aircraft. The aim is to replace ten of the aircraft still on order with five...
More
 
 
Latest News
Updated 12 minutes ago A digital switch-on date marking the start of South Africa’s transition from analogue to digital broadcasting will be announced “shortly”, following Cabinet’s approval for a control system for the required set-top boxes (STBs). Communications Minister Faith Muthambi,...
Updated 37 minutes ago Topping the list of political risks facing emerging market investors is the increasing instability in already-fragile oil-producing countries such as Iran, Iraq, Libya, Russia and Venezuela as a consequence of the low oil price, Aon Risk Solutions’ 2015 Political...
Updated 39 minutes ago Finance Minister Nhanhla Nene has called for public comment on government’s proposal of a temporary reduction in employers and employees’ contributions to the Unemployment Insurance Fund (UIF). In his 2015 Budget Speech, the Minister proposed to reduce the...
More
 
 
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
 
 
 
 
 
This Week's Magazine
Walter Hill
Eqstra Holdings was going to reduce its exposure to contract mining, but it was not yet ready to sell the troubled business, said CEO Walter Hill on Tuesday. He said Eqstra would not sell its contract mining business in a “depressed market”. He said it would be...
Subscribe to Engineering News and Mining Weekly for two years, but only pay for the first year.  The weekly editions of Engineering News and Mining Weekly will be posted to your preferred postal address and also gain access to:
National flag carrier South African Airways (SAA) is in an advanced stage of renegotiating its deal with European airliner manufacturer Airbus to acquire A320 single-aisle (or narrow body) aircraft. The aim is to replace ten of the aircraft still on order with five...
Worldwide, the main thrust in the ports industry over the past decade or more has been to increase efficiency. Traditionally, ports have been run by engineers and mariners and, in the past, increasing a port’s capacity was achieved by expanding the harbour. “That has...
What do you do when an elephant has a toothache? You call Dr Gerhard Steenkamp from the University of Pretoria’s (UP’s) faculty of veterinary science, Onderstepoort, one of only two elephant ‘dentists’ in the world.
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96