Engineering News

Strike action in South Africa cost JSE-listed construction group Murray & Roberts an estimated R200-million in the six months ended December 31, says CE Henry Laas.
A nationwide transport strike, for example, impacted on the delivery of the group’s construction products to clients. Violent strikes also halted work at mines, as well as delayed or postponed a number of capital expenditure projects.
The new calendar year has not brought respite either, with Murray & Roberts involved in a seven-week-long strike at the Medupi power station construction site.
Laas says the group is “very unhappy” with the current violent labour unrest in South Africa, which is “not easy to manage”.
“I support the idea of labour unions, but what is currently happening is unacceptable. There are procedures and processes in place to resolve disputes, but it seems as if these are not being followed.”
Laas says it is important that all parties adhere to existing labour legislation in South Africa, as well as the wage agreements that have been put in place.
Murray & Roberts in February reported a return to profitability following two consecu- tive years in the red.
The group generated revenue of R16.3-billion for the six months ended December 31, 2012, up from R15-billion for the six months ended December 31, 2011.
Murray & Roberts reported an attributable profit of R262-million, compared with a loss of R528-million in the comparable period.
At December 2012, the group’s net cash position was R1.1-billion, compared with the R21-million net debt recorded at the end of December 2011.
Much of the group’s improved performance, especially in the Construction Africa and Middle East division, could be attributed to the completion of some significant loss-making projects, such as in the Middle East, notes Murray & Roberts FD Cobus Bester.
This division went from a loss of R779-million at the end of December 2011 to a small operating profit of R33-million for the six months under review.
“The challenge for us in the next six months is to turn this business around,” says Bester.
Laas adds that the group is able “to do more” to improve the efficiency with which it executes projects. While Murray & Roberts has “cut back dramatically” on its presence in the Middle East, Bester says, it will re-enter when the time is right.
The focus is also on expanding the group’s footprint into Africa, with Murray & Roberts currently only active in Namibia and Botswana.
Laas says the Ghana office that recently opened its doors will be followed by an office in Zambia, in June, and possibly an office in Kenya by the end of the year.
Murray & Roberts’ Construction Austra- lasia Oil & Gas and Minerals division has proved to be the jewel in the group’s crown, increasing its operating profit from R82- million to R334-million, at an operating margin of 5%, up from 2%. Its revenue contribution to the group has also almost doubled to R6.3-billion.
This division also held R22-billion of the group’s R48.3-billion order book at the end of December 2012.
Around 60% of the Murray & Roberts order book was international work, with 40% of that work in the Southern African region.
Laas adds that the group is continuing with its disposal of noncore assets, such as the businesses of Rocla and Hall Longmore. These businesses have now been classified as discontinued operations.
As for the Competition Commission inves- tigation into collusion in the construction industry, Laas says the group has made what it believes to be “adequate provision” for any fines to flow from the process. He adds that Murray & Roberts is “not at risk” from its current practices, with all the competition law transgressions it is aware of having taken place in 2005 and 2006, or prior to these dates.