http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.14Change: 0.04
R/$ = 10.52Change: 0.01
Au 1304.62 $/ozChange: 5.74
Pt 1486.50 $/ozChange: 13.00
 
 
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 Suppliers Directory Research Jobs Announcements 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|Eskom|Genrec|Grinaker|PROJECT|Projects|Roads|Africa|Australia|South Africa|Zambia|Construction|Mining|Steel|Steel Supply|Fabrication|Infrastructure|Iron Ore|Kobus Verster|Power|Roger Jardine|Australasia
Construction|Engineering|Gold|Africa|Eskom|PROJECT|Projects|Roads|Africa||Mining|Steel||Fabrication|Infrastructure|Iron Ore|Power||
construction|engineering|gold|africa-company|aveng|eskom|genrec|grinaker|project|projects|roads|africa|australia-country|south-africa|zambia|construction-industry-term|mining|steel|steel-supply|fabrication|infrastructure|iron-ore|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
 
 
 
 
 
 
 
 
Other Construction News
Basil Read CEO Neville Nicolau
Updated 3 hours ago Construction, mining, development and engineering group Basil Read on Monday announced the appointment of Neville Nicolau as CEO and executive director of the company as from September 1. Nicolau, a former CEO of Anglo American Platinum and a former COO and executive...
The South African Real Estate Investment Trust (SA Reit) Association has called on the Competition Commission to intervene in undesirable exclusivity clauses in retail leases that were allowing retailers to stifle market share. The association’s members, which...
ADAM HABIB University of Witwatersrand vice-chancellor and principal Adam Habib
The first of a series of 15 public debates exploring options for the implementation of the National Development Plan (NDP) was officially inaugurated at the University of the Witwatersrand (Wits) School of Governance this week. In association with the Oliver and...
More
 
 
Latest News
Updated 14 minutes ago State-owned freight logistics group Transnet has awarded integrated solutions provider Tenova Mining & Minerals South Africa a contract for the supply of three reverse-pulse bagfilters. Two of the filters would be installed on multiproduct rail tipplers and one on a...
Updated 17 minutes ago Liquidators have now been appointed to wrap up the liquidation of financially distressed civil engineering group Protech Khuthele Holdings. Theodor Wilhelm van den Heever, Mark Abraham Christian, Irene Susan Ponnen and Mohamed Ismail Patel have been appointed to...
Updated 49 minutes ago Aluminium products supplier Hulamin, which on Monday reported a 42% year-on-year lift in earnings for the first half of 2014, has revealed that it is preparing an application for reciprocal import tariff protection, which it plans to lodge shortly with the...
More
 
 
Recent Research Reports
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.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
 
 
 
 
 
This Week's Magazine
Multinational semiconductor chipmaker corporation Intel announced its national campaign to further acquire partners to drive its She Will Connect programme, an initiative that aims to expand digital literacy skills to young women in developing countries, further into...
South Africa's MeerKAT radio telescope array programme should get back on schedule within a few months. This assurance has been given by SKA South Africa (SKA SA) associate director: science and technology Prof Justin Jonas. Early last month, Science and Technology...
The Passenger Rail Agency of South Africa’s (PRASA’s) Metrorail service will remain a subsidised service following its current multibillion-rand rolling stock, station, depot and signalling upgrade programme. PRASA group CEO Lucky Montana has allayed fears that...
GARYN RAPSON Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will open the door for court battles to determine who will be held liable for the remediation
The uncertainties around the remediation of affected areas as addressed in the Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will possibly spark litigation and disputes between landowners and businesses, contractors...
South Africa is currently the largest component of the African Development Bank’s (AfDB’s) active portfolio in Southern Africa, comprising 62.5% of the bank’s $7.9-billion exposure to the 12-country region – the second largest beneficiary is Mauritius, which...
 
 
 
 
 
 
 
 
 
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