JSE-listed Stefanutti Stocks on Thursday reported an 11% dip in profit for the first half of the current financial year to R85-million, as an “extremely challenging” trading environment impacts performance.

The construction company’s operating profit decreased from R176-million in the six months to August 31, 2015, to R100-million in the six months to August 31, while the operating profit margin contracted from 3.4% to 2.3% during the period under review.

“The group's performance reflects the extremely challenging trading environment, which includes the negative impact of currency fluctuations in those African countries in which we operate,” Stefanutti said, pointing to a negative impact of some R50-million during the half-year under review.

However, earnings per share (EPS) from total operations increased to 55.57c in the six months under review, from 54.09c apiece in the corresponding period last year, while diluted headline earnings per share (HEPS) increased from 45.07c apiece to 48.5c.

“Excluding the discontinued operations from the comparative period, the EPS of 55.57c and diluted HEPS of 48.5c cents decreased by 19.5% and 17.4% respectively [from the restated 69.02c and 58.71c respectively],” the company pointed out.

During the six months to August 31, contract revenue from operations contracted to R4.4-billion, a shaving of R888-million from R5.3-billion in the prior corresponding period, mostly owing to revenue declines in the roads, pipelines and mining services (RPM), building and structures divisions.

“The South African construction market continues to be extremely challenging with escalating levels of competition for the limited available work likely to further impact operating profit margins.”

The constrained structures division reported a persistent decline in infrastructure projects – from both the public and private sectors – with contract revenue decreasing to R954-million in the six months under review, from R1.1-billion in the first half of the prior financial year.

Operating profit fell from R25-million to R3-million, while the operating profit margin was less than 1%, compared with 2.3% in the comparative period last year, with the number of large projects coming to the market remaining constrained and work secured predominantly from medium-sized projects of between R100-million and R350-million.

“This business unit has been restructured and cost-cutting measures are ongoing as it aligns itself to market conditions,” Stefanutti said.

The RPM division posted a R497-million contraction in contract revenue during the six months under review to R1-billion and a reduction in operating profit to R81-million in the first half of 2016, compared with R100-million in the prior period. The operating profit margin of the division, however, increased from 6.5% to 7.9%.

The mechanical and electrical (M&E) division maintained its contract revenue at around R556-million, while operating profit reduced from R33-million to R24-million with a corresponding reduction in operating profit margin to 4.2%.

The building business unit's contract revenue reduced to R1.8-billion from R2.1-billion with a corresponding reduction in operating profit to R2-million, compared with the R10-million, excluding a R6-million fair value adjustment, recorded during the corresponding six months of 2015.

Despite the declines, Stefanutti remained optimistic of potential growth in certain sectors of the economy, which provided opportunities for the roads and earthworks, mechanical and building operations.

The group's order book is currently reported at R14.1-billion, R5-billion of which emanates from outside South Africa.

The structures division’s order book was maintained at R1.9-billion, while RPM’s and M&E’s order books declined to R4.8-billion and R900-million respectively.

The building unit’s order book climbed to R4.1-billion.

During the half-year under review, Stefanutti’s capital expenditure was R78-million, up from the R52-million in the first half of last year, of which R49-million was incurred for maintaining capacity.

The group's overall cash position at the end of August was R1-billion.

No dividend was declared for the period under review.