Despite challenging trading conditions, Stefanutti Stocks on Thursday reported an 18% increase in operating profit, to R119-million, for the six months ended August  31.

Revenue for the period also grew 18%, to R5.2-billion, up from R4.4-billion in the comparable period last year.

The operating profit margin remained consistent, at 2.3%.

The group’s order book is currently at R13.9-billion, of which 35% is from work outside South Africa.

Stefanutti Stocks operates in South Africa, sub-Saharan Africa and the United Arab Emirates (UAE).

“The group’s multidisciplinary and geographically diversified business structure continues to provide a stable platform in this challenging environment,” commented Stefanutti Stocks CEO Willie Meyburgh.

The Roads, Pipelines & Mining Services (RPM) division saw operating profit increase from R81-million to R92-million.

Road projects in Zambia and Nigeria have, however, proved problematic for this division, owing to delayed and/or nonpayments.

Operating profit margin declined from 7.9%, to 6.4%.

RPM's order book at August 31 was R6-billion, up from R4.8-billion in the comparable period.

The Building business unit saw improvement in operating profit to R22-million, up from R2-million. Operating profit margin increased to 1%, up from 0.1%.

Building’s order book at August 31 was R3.7-billion, down from R4.1-billion. This number, however, excluded the UAE order book of R1.1-billion.

The Structures business experienced a continued decline in available infrastructure work from government and the private sector.

Operating profit reached R9-million, up from R3-million. The margin was 1%, up from 0.3%.

The number of large projects coming to the market for this business unit remained constrained, with work largely flowing from medium-sized projects.

Although the number of tender enquiries received from the mining sector had increased, the environment within which this business operated remained competitive, with the order book and profit margin under pressure.

The Structures order book at August 31 was R1.9-billion.

The Mechanical & Electrical (M&E) business saw a sharp drop in operating profit, from R24-million at August 31 last year, to R1-million, mainly as a result of a shortage of work and the termination of a contract.

A decline in opportunities in the petrochemical sector was expected to put pressure on M&E’s combined order book and operating margins.

M&E’s order book at August 31 was R600-million, down from R900-million.

Looking ahead, Meyburgh said Stefanutti Stocks would continue seeking opportunities in the region and, on a more selective basis, further afield in sub-Saharan Africa.

The South African construction market remained “extremely competitive” owing to an ongoing lack of infrastructure spend, coupled with low business confidence.

“Given the current state of the South African construction market, construction activities and margins are expected to remain under pressure,” said Meyburgh.

He added that the group’s order book had remained relatively constant over the past two years, at around R13-billion to R14-billion.

“In the short-term there are potential pockets of growth, which include mining surface infrastructure, marine, water and sanitation treatment plants, and residential and mixed-use building projects.

“In addition, in the medium-term there are potential opportunities in petrochemical tank farms, roads and bridges and selected openpit contract mining work. These will provide opportunities for all our business units, both locally and cross border.”