Pan-African infrastructure group Consolidated Infrastructure Group (CIG) on Monday posted revenue growth of 29% to R2.7-billion for the six months to February 28, owing to its strategy to expand across Africa’s energy markets.
The company further reported a 20% year-on-year increase in its earnings before interest, taxes, depreciation and amortisation to R330-million; however, it noted that its earnings were negatively impacted by a reduction in profitability in CIG’s Angolan associate, AES, due to a slowdown in oil exploration, a stronger South African rand and higher interest costs.
Earnings per share and headline earnings per share were down 18.5% to 111c apiece. The group ended the period with cash of R548-million, compared with R481-million as at end-February 2016.
Meanwhile, CIG posted a strong order book, growing 25% year-on-year to R6.6-billion.
CEO Raoul Gamsu said he remained confident in the group’s focus on Africa and the Middle East, and is “pleased at the continued momentum in CIG’s international penetration in the period. The Middle East-Africa region presents a wealth of opportunity given the upward trend in renewable-energy projects and continued demand for and funding of electricity grid infrastructure”.
The company’s power division remained the key driver of results and performed well, with its renewables start-up, CIGenco concluding its first contract for an independent power project in Namibia.
In South Africa, the division faced a mixed bag of conditions, with uncertainty in the municipal and renewable-energy sectors balanced by continued infrastructure investment on the part of Eskom and the mining sector.
The building materials and rail divisions both recorded stronger and positive growth, mainly due to improved market conditions and expanded market share. AES, the oil and gas division’s waste service business in Angola, fared worse and was impacted on by reduced oil exploration activity and the appreciation of the rand.
“CIG acted quickly together with local management to contain costs in the slower period and AES continues to deliver positive returns on investment for the group, said Gamsu, adding that conditions for foreign currency have improved in Angola and AES currently has no backlog on its offshore creditor payments.
Looking ahead, he noted that CIG would leverage the group’s cross-selling opportunities by “piggybacking” the established presence and local market experience of group companies to introduce their CIG peers’ products and services. “A tangible example is Ghana where Conco has an excellent record but where Conlog has never operated.”
He also remained optimistic about opportunities in South Africa, despite the delays in starting Round 4 renewable-energy projects. CIG is a major participant in Round 4 having secured R2.3-billion of work. “We have to bear-out the delay in commencing Round 4, as we are confident that the programme will happen and will contribute significantly to our South African Power business over the next three years once active.”
Gamsu pointed out that addressing new black economic empowerment legislation in South Africa and the sectors’ skills shortage will continue to pose challenges to growth.
“The change in economic outlook, as a result of our recent credit ratings downgrade has somewhat obscured visibility into the future and curbed the slowly building sense of optimism. However, positive conditions in the power and rail markets continue to prevail and CIG will capitalise on group strengths in a broad spread of regions to continue expansion and growth,” he added.