Following several acquisitions in the 2019 financial year, the 2020 financial year would be “a year of consolidation for all three business platforms”, with the focus on growing the order book and successful project delivery, multinational engineering and construction services provider Murray & Roberts (M&R) said in a recent business update to shareholders.

The group reported that its underground mining platform’s order book had decreased to R20.9-billion, as at October 31.

Nevertheless, the platform continued to perform well, M&R said, noting that it had capitalised fully on its growth potential by “substantially increasing its share of the regional markets in which it operates”.

Commodity prices had generally been stable in the last two years; however, M&R said it appeared that the global mining cycle had reached a plateau. Capital expenditure in the mining and mining services markets was expected to level off over the next three years, and M&R believes there are still sizable opportunities for the platform but expects short to medium-term earnings to show measured growth from current levels.

The oil and gas platform, meanwhile, is recovering from a low base and client timeframes for the award of new projects continue to be highly variable. However, the order book has increased substantially to R33-billion as at October 31.

This increase since June is primarily due to the award of a R9.4-billion petrochemicals engineering, procurement and construction project to M&R subsidiary Clough USA, for which the notice to proceed was received in November.

This award is expected to substantially increase revenue during the second half of the 2020 financial year.

The platform’s strategy of diversification into the Australian infrastructure and mining markets and expanding its oil and gas business internationally is further delivering positive results, especially considering that the Australian infrastructure and mining markets are said to present significant opportunity.

Targeting Oil According to M&R, the platform was targeting oil and gas projects in Australia, Canada, the US, Mozambique, Kazakhstan and Papua New Guinea.

The power and water platform order book, meanwhile, remained stable at R900-million as at October 31, mainly owing to the inclusion of transmission orders following the acquisition of Optipower.

Owing to a lack of project opportunities in South Africa, M&R lamented that it would take time to re-establish the business after completion of the Medupi and Kusile power station projects.

Substantial investment in the short to medium term is, however, expected in the transmission and distribution subsectors of the power market, and the platform is hoping to secure maintenance contracts from State-owned power utility Eskom for its ageing fleet of coal-fired power stations.

According to M&R, investment in the local water sector continued to be fragmented and limited, notwithstanding the “increasing pressure to upgrade dysfunctional municipal wastewater treatment plants”.

However, M&R acknowledged that the City of Cape Town’s drought resilience plan was being implemented with several wastewater treatment plant improvement and expansion projects coming onto the market.

The platform has extended its service offering to complementary markets, including petrochemicals, metals and minerals, and pulp and paper.

Gas projects in Mozambique were also gaining momentum and would provide potential project work opportunities from the 2021 financial year, M&R commented.

Further, investment in new fuel storage terminals should also present opportunities in the medium term.

Commenting on the closure of business in the Middle East, M&R said that exiting this region “remains a complex challenge”, with many risks to be managed and long-standing commercial matters to be resolved.

However, the accounting position taken with respect to this business was considered prudent, the company said, adding that, as all remaining construction work on the residual projects had been completed, the business was expected to be reclassified as a discontinued operation for the 2020 financial year.

Overall, M&R said its ‘New Strategic Future’ plan was gathering momentum and bearing fruit.

The group had built “a quality order book” of R54.8-billion, with “near orders” of R5.1-billion as at October 31, and the company was “confident that its growth plans over the medium term are achievable”.