Oct 25, 2012
Turnaround strategy sees Esorfranki restore profitabilityBack
Construction|Engineering|Gauteng|Johannesburg|Natal|Pretoria|Africa|Civils|CoAL|Esorfranki|Gautrain|Ghana|Housing|Mining|Pipelines|Pipes|PROJECT|Projects|Road|System|Africa|Ghana|Mauritius|Mozambique|South Africa|Gautrain|Kusile Power Station|Park Station|Equipment|Pipes|Northern Cape|Gautrain|Bernie Krone|Gautrain|Power|Pipelines
© Reuse this
The company on Thursday reported 300% growth in its headline earnings a share to 7.8c, up from a headline loss a share of 3.9c in the year-ago comparitive period, owing to group-wide rationalisation processes which were put in place in the previous financial year.
Esorfranki boosted its six-month revenue to R1.14-billion, while net asset value a share increased 16.5% to 267.9c.
CEO Bernie Krone said the group managed to grow its order book by 35% to R2.43-billion, despite the depressed South African construction sector.
“We are aiming to continue growing our order book with more long-term contracts,” he said, adding that Esorfranki’s focus would be on expansion into Africa, while capitalising on opportunities in the local market when they became available.
Krone was particularly upbeat about Gautrain private development spinoffs, stating that it expected signficant development to occur around Park station and into the Braamfontein surrounds, now that the final leg of the passenger rail system was operational.
Meanwhile, Krone said he was satisfied with the group’s well-sustained profitability in a still tough economic climate.
During the period under review, the group spent R126-million on beefing up property, plant and equipment, the majority in Esorfranki Civils.
Formerly beleaguered Esorfranki Civils saw an ongoing revival following on the stronger second half of the previous year. Revenue increased 69% to R599-million, while the division’s order book grew 101% to R1.8-billion with improved operating margins.
“The R21 road contract has turned around and is now breaking even and work on the Northern Cape’s Bestwood housing project is progressing well,” said Krone. Esorfranki’s part in the R340-million Orchards development, near Pretoria, also kicked off during the period.
With affordable housing projects planned in the Vaal Triangle and Thabazimbi and a low-cost housing development in Johannesburg, the group was expected to further capitalise on opportunities in housing.
He noted that securing mining sector contracts remained difficult in light of market conditions. Nonetheless, Esorfranki Civils managed to secure contracts at Kusile power station.
Esorfranki Pipelines achieved an order book of R314-million at period-end, which compensated for the loss of the Western Aqueduct contract in the previous year, while resolution of the ongoing BG3 contract dispute was expected in early 2013.
“We are optimistic regarding Esorfranki Pipelines’ prospects,” said Krone, referring to potential projects in KwaZulu-Natal and Gauteng, and further afield in the rest of the Southern African Development Community region. He expected that the slow delivery of pipes from suppliers, which is currently hampering growth, would be alleviated in the next six months.
Turning to Esorfranki Geotechnical, he said growing offshore revenue reflected the success of expansion moves into sub-Saharan Africa, and offset to an extent a slowing South African construction sector.
“Locally competition remains stiff, although we have a 40% market share. Domestic revenue increased only 1.2%, with South Africa still beset by pricing pressures and limited demand, compared to offshore revenue, which grew 26%.”
He pointed out that Ghana, Mauritius and the coal mining sector in Mozambique offered some attractive opportunities for growth. “Despite competitive markets Esorfranki Geotechnical expects to achieve targets in all regions this year.
“Although the Angolan market has become more competitive with the entry of international construction companies, the divison is confident of further contract awards,” Krone said.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Construction News
Updated 2 hours 25 minutes ago South Africa’s credit rating is at risk of being downgraded if government fails to pay the debt taken on to fund infrastructure programmes, such as the upgrading of Gauteng’s major highways, National Treasury deputy director-general for tax and financial sector...
Independent geotechnical contractors Keller subsidiary Franki Africa last month completed the construction of basement parking at wealth manager Citadel’s premises in Claremont, Cape Town. The contract was awarded to Franki in July last year and included lateral...
The worldwide acceptance and use of mechanically stabilised earth (MSE) technology is one of the most significant civil engineering developments of the past 50 years, says retaining wall company Reinforced Earth. MSE is the generic name for a composite material...
Updated 31 minutes ago South Africa’s crude steel production dropped by a sizeable 17.2% year-on-year to an estimated 530 000 t in April, amplifying a global trend that saw world steel production decline by a comparatively marginal 1.7% to 135-million tons in the fourth month of the year....
Updated 47 minutes ago The Treasure the Karoo Action Group (TKAG) on Friday called on government to delay publishing final regulations and issuing rights for shale gas exploration in the Karoo, until a 24-month strategic environmental assessment (SEA) has been concluded. TKAG CEO Jonathan...
Updated 1 hour 44 minutes ago Strengthening its position in the European extrusion coatings market, international packaging and paper group Mondi has inked a deal with technical laminates and protective packaging company Walki Oy for the acquisition of two extrusion coatings plants in...
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
While economic forecasts for the African continent are most favourable, African airlines may not be able to benefit from the expected growth in the region’s gross domestic product (GDP), International Air Transport Association VP: Africa Raphael Kuuchi has warned....
The Automotive Production and Development Programme (APDP) will need to change substantially post 2020, says Metair Investments South African operations COO Ken Lello. “We must not make tweaks. We have to change. What we are doing is not sustainable.”
Banking group Absa’s forecast is for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, says Absa sectoral analyst Jacques du Toit. He warns that possible interest rate hikes in the US may see capital being pulled from...
The Dispute Resolution Centre at the Bargaining Council for the Civil Engineering Industry (BCCEI) is now open to handle party-to-party disputes. The BCCEI represents the interests of all level four to nine Construction Industry Development Board companies.
Communications technology firm Ericsson sub-Saharan Africa head Fredrik Jejdling says the company’s commitment to sustainability and corporate responsibility has been integrated into all facets of its operations, which has provided it with sustainable revenue...