JSE-listed construction company Group Five reported on Friday that it was in discussions with several companies regarding the sale of its loss-making construction materials businesses.

The disposal announcement was made together with a trading statement, in which the group warned that its earnings for the six months to December 31, 2011, would be materially weaker than the previous corresponding period.

It confirmed that the results had been negatively impacted by losses in the construction materials segment.

The unit, which includes Group Five’s aggregates, ready-mix concrete, cement extenders and mobile-crushing services, contributed only 4.7% to 2011 revenue of R9.2-billion and made an operating loss of R68-million last year.

Most of Group’s Five’s 2011 revenues arose from its construction unit, which reported revenues of R7.4-billion and contributed about R480-million to the company’s operating profit of more than R498-million.

The construction materials unit, meanwhile, was also the subject of a R9-million restructuring and rationalisation programme during 2011 as margins came under pressure. The group reported recently that the total operating margin for the segment had fallen from around 8.3% in 2009 to -15.7% last year.

“The board of directors of Group Five have resolved to dispose of the businesses that constitute the construction materials segment and, as such, the group is currently in discussions with several parties to effect these disposals. If successfully concluded, the disposals may have an effect on the price of the company’s shares,” Group Five said in a statement to shareholders, adding that it would be treated in its financial statements as a ‘discontinued operation’.

It also warned that fully diluted headline earnings per share would be 30% to 36% lower, at 127c to 139c, than the 198c published for the previous corresponding period.

In an operational update, Group Five indicated that its results for the interim period were impacted not only by the construction materials-related losses, but also by holding costs and losses from a contract in the Middle East, which affected its civil engineering results.

Restructuring and investment costs were also incurred during the period, which would only deliver benefits in either the second half, or during its 2013 financial year.

The performance of its manufacturing had improved, while its investments and concessions unit performed well on the back of new Eastern Europe tolling contracts.

Group Five indicated that it expected a slow market recovery from the second half of its current financial year, which could support an improvement in the group’s trading performance from 2013.