Stefanutti Stocks planned to cut back on investment and capital expenditure (capex) and withhold dividends, as the construction company continued to stabilise and improve its financial and operational position.

CEO Willie Meyburgh said cash spent on investing activities reduced to R49-million during the six months ended August 31, from R397-million during the prior corresponding period, mainly as a result of reduced capex and cash required for acquisitions.

Capex, including own infrastructure spend, reached R66-million during the August interim period, down from R185-million during the six months to August 2012, and would not exceed R130-million for the full year.

The group’s performance during the six months to August had reflected an overall year-on-year improvement, including
profitability and growth in the order book, despite the current tough economic environment.

Meyburgh noted that, besides the reduced capex, the improved financial performance was attributable to good cash generation from operations, which was recorded at R326-million during the half-year under review, compared with R403-million from operations during the first half of the year before.

Market conditions remained “highly competitive” as a result of the depressed global and local economic conditions, said Meyburgh, adding that protracted strike action in South Africa’s construction sectors also had a negative effect on the group’s results, costing the firm R90-million.

However, Stefanutti was now well positioned to manage short-term economic and market challenges, while optimising opportunities when economic conditions improved and large capital projects emerged.

“We are much stronger as we stand today, and well positioned to capitalise any future projects,” he averred.

Stefanutti posted earnings and headline earnings a share of 38.5c and 36.9c during the six months to August, an increase from the 29.5c and 27.2c apiece reported respectively in the comparative period last year.

The group posted an after-tax profit of R67-million – an increase on the R51-million achieved during the prior corresponding period, and an operating profit of R114-million, a 31% rise on the R87-million achieved in the period to August 2012.

Stable revenue of R4.8-billion was achieved during the firs half of the current financial year, with a strong performance by the Roads, Pipelines and Mining Services (RPM) unit, with operating profit and revenue reaching R95-million and R1.2-billion respectively, and the group’s Structures business, which delivered operating profit and revenue of R74-million and R1.4-billion respectively.

This was partially offset by operating losses of R43-million incurred in the Building business, despite the generation of R1.6-billion revenue, and losses of R16-million in the Mechanical, Electrical and Power (MEP) business unit, which reported revenue of R650-million.

“We are of the view that market conditions in the South African construction sector will remain challenging for the next 12 to 18 months. There is still sufficient work available in midsize projects to maintain our order book,” Meyburgh added.

Stefanutti boasted a current order book of R11.7-billion, comprising R2-billion for the Structures unit, R4.8-billion for the RPM business, R3.5-billion for the Building unit and R700-million for MEP.

“A number of new projects in the transport and contract mining sector are expected to be awarded before financial year-end. On the back of previous successes, the business unit is actively pursuing further opportunities in sub-Saharan Africa,” he said.

Further, opportunities in marine and water treatment projects and in the oil and gas sector, both locally and in sub-Saharan Africa, had emerged.