Sep 03, 2012
WBHO edges ever more outside SA, FS roads payment starts to flowBack
Renewable Energy|South African National Roads Agency Limited|Australia|South Africa|Big Mining Groups|Louwtjie Nel|The 2010 World Cup
© Reuse this
WBHO revenue for the year ended June 30 increased by 21.2%, from R14.8-billion in the previous year to R17.9-billion. Profit for the year dropped 9.6%, to R713-million. Operating margin declined from 7.4% to 5.5%.
Nel regarded the revenue growth outside South Africa as “disappointing, as this is home, and this is where we want to be, but we have to go where the work is”.
He added that the company’s future South African earnings “won’t be going much lower. We are pretty much in good balance now”.
However, Nel also noted that WBHO did not have a strategy to earn a certain percentage of its revenue in a certain geographic area – “our strategy is to find the best work we can”.
The current WBHO order book comprised 67% of foreign projects, with the balance of work located in South Africa. The order book for the group at July 1, 2012, was R20.9-billion, compared with R16.2-billion at July 1, 2011 – an increase of R4.6-billion.
“There is a big order book in Australia at the moment,” said Nel.
The negative effect of doing so much business in Australia, however, was that margins were tight there. Nel was hopeful of some improvement going forward.
With big mining groups also cutting down on capital expenditure as global financial jitters continued to spread, Nel admitted that WBHO’s exposure to Australia was “a risk” for the company.
He pointed out, though, that the group was only “a small player” in Australia’s mining industry, involved largely in upgrade and maintenance projects.
“We just upgraded from our bakkie. We have a lot of potential. We are not an engineering, procurement and construction contractor in that field.”
Nel said he could imagine the Australian resources boom potentially cooling down, but that WBHO was confident of a “reasonable run” as it could still secure some market share from the “big guys”.
As for the local market, Nel believed that some segments had bottomed out, with a slight improvement in margins, but noted that it would “take a long time to really come back. In the short term, we don’t expect it to improve much”.
WBHO would “do well to stay in the 5% to 6% [margin] bracket”, he added, especially as Australia had traditionally been “below 3%.”
Nel said the local construction industry was probably somewhat “spoilt” by the boom in the run-up to the 2010 World Cup, with contractor margins after tax before this “always” between 3% and 4% – a level the market was again closing in on.
“There is potential in South Africa. We can see the work coming in from the private sector and a little bit on the South African National Roads Agency Limited (Sanral) and Transnet side.”
He added that the private sector was “keeping most of the contractors alive at the moment”, with the industry still in a bit “of a survivalist mode”.
However, Nel noted that WBHO was also a bit “more bullish” on government spend than a year ago.
“We see two, three new tenders floating through our offices each week for roads, either provincial or for Sanral. We have a lot of pipeline work on the go. If these renewable energy projects go, it will make a huge difference.”
He said the potential work from Transnet also seemed promising, but that this was still “a year away”.
Nel said he was hopeful of enough public sector work coming to market so that “everyone could get a fair share”.
“I think we have to be patient and, in about a year to 18 months, we we will hopefully really see the work flow through and then we can get going again.”
Competition Commission Provision, Free State Roads Update
However, Nel said on Monday that WBHO had reached a settlement with the provincial government and that work on the project would restart once payment was received.
He said the company had reached a payment agreement “in writing” in a settlement process which had also involved National Treasury. WBHO had received “a small portion” of the payment owing to the company at the beginning of August.
Nel did not want to release the quantum of money WBHO was to be paid, saying only that he was confident it would get 100% of the “finally negotiated sum”.
“We think we got a fair deal.”
As for another thorny issue, namely the South African Competition Commission’s investigation into collusion in the local construction industry, Nel said WBHO had provided for possible penalties in this long-running process, unlike last year, as it now “had a better idea what that provision should be”.
Nel said the group hoped for finality on the issue in the “next two to three months”.
He did not want to quantify the value of the provision as WBHO had not yet agreed on this with the Competition Commission, saying only that the group had provided for its “best estimate” of the settlement amount.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines
Other Construction News
Recent Research Reports
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 Report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
Projects in Progress - Second Edition (PDF Report)
Creamer Media’s second Projects in Progress supplement considers some of the major project developments under way, including high-profile energy and transport projects, as well as a few of the lower-profile public and private developments. What remains apparent is...
Water 2013: A review of South Africa’s water sector (PDF Report)
Creamer Media’s Water 2013 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.
Canadian Mining Roundup for June 2013 (PDF Report)
The June 2013 roundup includes details of the development of TSX-V-listed Aldridge Minerals’ flagship Yenipazar polymetallic project, in Turkey; the Canadian Nuclear Safety Commission’s renewal of Cameco’s uranium mining licence pertaining to the Cigar Lake...
This Week's Magazine
Mitsubishi Motors South Africa (MMSA) has introduced a 4x2 derivative of its Pajero Sport sports-utility vehicle (SUV), which will give it access to a substantial slice of the full-size SUV market, where it will compete with the likes of the Ford Everest, Chevrolet...
South African Energy Minister Ben Martins has affirmed that the government wants the country to be globally competitive in the nuclear sector. "Our responsibility has always been ... to ensure that, in nuclear energy, South Africa can compete with the rest of the...
Mercedes-Benz South Africa (MBSA) president and CEO Dr Martin Zimmermann describes the new S-Class as “a special place to be”, with the car creating a sense of “wellness” once you are seated inside the German brand’s flagship model. It is difficult to argue...
Water scarcity and water-quality issues are broadly recognised and understood in most political, business and civil organisations in South Africa, but solving water issues will require wide and continuous action in catchments and municipalities by organisations and...
Work is well under way on the R212-million Imvutshane dam, 30 km north-west of Stanger, in KwaZulu-Natal, which is a key link in supplying people in rural Maphumulo with a reliable source of safe drinking water.