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Jun 29, 2012

M&R wraps up problem contracts, looks to kickstart growth strategy

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Construction|Building|Eskom|Gautrain|Mining|Murray|Platinum|PROJECT|Projects|rail|Rosebank|Water|Gautrain|Maintenance|Steel|Gautrain|Gautrain|Henry Laas|Power|Water
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Construction group Murray & Roberts (M&R) was ready to implement a two-year, board-approved growth programme starting July 1, following the completion of a year-long recovery strategy which saw the resolution of what CEO Henry Laas termed “several challenging projects”.

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

Laas said in a conference call on Friday that “work was basically complete” on the Australian Gorgon Pioneer Material Offloading Facility project, which he described as a major former cash-drain on the group. M&R was currently demobilising from the site.

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

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

However, Laas said there remained a dispute on the interpretation of tunnel water specifications as per the concession agreement with the Gauteng government.

Murray & Roberts formed part of the Bombela consortium responsible for building and operating the rapid-rail link.

Arbitration on the water issue was expected to start in September, said Laas.

As the outcome was uncertain, M&R might still incur further costs on this contract, as the group could be forced to return to the tunnel between Rosebank and Part stations for further remedial work, he added.

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

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

Laas was also pleased that M&R finally had an agreement, again in principle, with a prospective buyer for its remaining steel business, with the company “hopefully” closing the sale before its financial results were announced in August.

More good news was that M&R’s order book remained strong, at more than R50-billion.

MIXED MINING OUTLOOK

Looking at the mining business specifically, Laas was 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 had already taken casualties, with two major local shafts placed on care and maintenance in recent weeks.

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

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

He noted that it was still “tough out there”, with margins highly competitive “and low”. He expected, however, that M&R’s construction business would show “a significant improvement” going forward as all major loss-making projects had now been wrapped up.

Laas added that M&R had determined that its earlier provision for possible penalties under the Competition Commission investigation into collusion in the local construction industry had 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: Creamer Media Reporter
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