http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.14Change: -0.15
R/$ = 12.05Change: -0.20
Au 1200.03 $/ozChange: -6.12
Pt 1139.50 $/ozChange: -16.00
 
 
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 05, 2012

SA, Africa construction Aveng's achilles heel

Back
Aveng CEO Roger Jardine discusses the group's 2012 financial results. Camera work and editing: Darlene Creamer. Recorded 05.08.2012
 
 
 
Construction|Engineering|Gold|Africa|Aveng|Environment|Eskom|Genrec|Grinaker|Mining|PROJECT|Projects|Risk Management|Roads|Africa|Australia|South Africa|Zambia|Steel|Steel Supply|Fabrication|Infrastructure|Iron Ore|Iron-ore|Kobus Verster|Power|Roger Jardine|Australasia
Construction|Engineering|Gold|Africa|Environment|Eskom|Mining|PROJECT|Projects|Risk Management|Roads|Africa|Zambia|Steel||Fabrication|Infrastructure|Iron Ore|Iron-ore|Power||
construction|engineering|gold|africa-company|aveng|environment|eskom|genrec|grinaker|mining|project|projects|risk-management|roads|africa|australia-country|south-africa|zambia|steel|steel-supply|fabrication|infrastructure|iron-ore|iron-ore-person|kobus-verster|power|roger-jardine|australasia
© Reuse this



The South African and African construction and engineering division should shoulder a substantial part of the blame for construction group Aveng’s 64% drop in operating profit to R535-million for the financial year ended June 30.


Group revenue was up 19% compared with the previous financial year, to R41-billion.

The local construction division reported a 4% increase in revenue to R9.9-billion, but the flipside of the coin was a R733-million loss for the period, down 265% from the R443-million profit reported in the 2011 financial year.

Aveng financial director Kobus Verster said on Wednesday that this loss could be attributed to “cost overruns and time delays” of around R200-million on a Free State roads project, two Sasol projects and a batching plant project, in Zambia. Margins in the region were also under pressure, with the absence of any big projects completed in 2012 also to blame.

Included in the loss was also a provision for a settlement in the Competition Commission investigation into collusion in the construction industry, and the poor performance of DSE Steel Fabrication. The latter was linked to Eskom’s power programme, with Aveng pursuing a claim against Murray & Roberts company Genrec regarding steel supply to the Medupi and Kusile power station projects.

Aveng CEO Roger Jardine added to this list by saying that the construction company Grinaker-LTA, which formed part of this division, had also been the subject of restructuring spend, as well as holding costs to retain skills in case of increased public sector spend in South Africa.

The restructuring of Grinaker-LTA had shrunk the company by around 150 people, with Aveng’s payroll almost 5 000 people smaller than during the construction boom in 2008.

Overheads at the company were also cut by 20%, and stronger risk management implemented on smaller projects.

“The restructuring has been quite painful, but it is done,” said Jardine. “In the year ahead we look to a substantial improvement in the performance of Grinaker-LTA.”

He added that Grinaker-LTA currently had little public sector work to keep it busy.

Only 3.6% of Aveng’s current two-year order book of R46.9-billion (up from R37-billion a year ago) would play out in the South African public sector, down from 13.3% in 2009. He said this could change as “government’s infrastructure roll-out gained momentum”, but added that this “won’t happen overnight”.

Jardine only expected to see more public sector projects find their way to local construction companies’ order books in 18 months’ time.

He warned that this prolonged investment trajectory had an impact on “employment generation” and “employment retention” at Aveng.

While the South Africa public sector could secure just under 4% of the Aveng order book, Australasia and the Pacific, as a region, had a 57% share. In fact, markets outside the rand-currency sphere made up 74% of the Aveng order book.

Australia was showing signs of cooling down, though, noted Jardine, with a slowing Chinese economy impacting on mining and infrastructure projects in the country.

“You have to keep a close watch if you operate in the commodities space as we do.”

He noted that Aveng was “hedging” against a global slowdown by operating in different currencies and different commodities.

The outlook for iron-ore was “questionable”, for example, said Jardine, while gold was “more positive” than other commodities.

Coupled to the commodities market, Jardine added that Aveng was also “bracing itself” for a softer steel environment “in the short to medium term”, with little or no price increases on the horizon.

Asked why Aveng still managed to show a profit while some competing local construction companies were pushed into the red in the past financial year, Jardine speculated that this could be attributed to the fact that companies which historically had big contracts leading up to the 2010 FIFA World Cup did not replace those with “small and intermediate projects”.


 

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Property Developments News
Paul-Roux de Kock
Residential property prices are forecast to grow at 7.2% this year, on the back of 6.72% growth in 2014.
A challenging construction sector, difficult contractual environment and poor operational performance have contributed to JSE-listed construction company Basil Read reporting an R820.9-million aftertax loss for the year ended December 31, 2014. “Lossmaking contracts...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...
More
 
 
Latest News
Suspended Cosatu general secretary Zwelinzima Vavi
Updated 4 minutes ago Suspended Cosatu general secretary Zwelinzima Vavi has condemned the decision of the federation's NEC to dismiss him with immediate effect. "I condemn the decisions of NEC, which dismissed the general secretary who was democratically elected," he said at a press...
Updated 5 minutes ago JSE-listed industrial conglomerate Ansys has raised R17.2-million through the issue of 42.4-million ordinary shares to partly fund the acquisition of Parsec Holdings and for working capital requirements. In November, the company entered into a R93.2-million...
Updated 46 minutes ago A new tool that provides municipalities with a prewritten tender and contract, which can easily be adapted to suit the specific needs and circumstances of a particular region, is now available and is expected to help municipalities curb water losses. The Model...
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
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.
 
 
 
 
 
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
RESOURCEFUL The raw material for the pilot plant would be supplied from the dissolving wood pulp plants at Sappi’s Saiccor and Ngodwana mills, in South Africa, and the Cloquet mill, in the US
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...
 
 
 
 
 
 
 
 
 
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