Aveng hangs Holcim out to dry, South Africa

Aveng hangs Holcim out to dry, South Africa
Published: 13 September 2006

Construction group Aveng, which reported sterling annual results yesterday, says it is in no hurry to decide whether to give partner Holcim’s mooted empowerment deal the go-ahead. 
 
Aveng would take "however long it is necessary" to consider its options against the sustainability of the deal and its effect on future funding requirements for Holcim SA expansion projects, among other things, said Aveng CE Carl Grim. 
 
The proposed deal would see Swiss cement group Holcim, which owns 54 per cent of Holcim SA, reduce its stake to eight per cent in a R6,8bn transaction with empowerment group AfriSam. 
 
Aveng, which owned 46 per cent of Holcim SA, had first right to buy the Holcim stake that AfriSam wanted to acquire, he said. Aveng could also opt to sell its own stake, or to allow the empowerment transaction to take place without changing its own shareholding. 
 
Grim, who was surprised by the announcement of the empowerment deal last month, said Aveng and Holcim were talking about a way forward. "It’s not an arm’s length, letter-writing affair," he said. 
 
Meanwhile, strong improvement in Aveng’s performance in the year ended June underscored that the tide is turning for large construction companies after a few lean years. 
 
Operating profit jumped 111% and revenue rose 19% to R16bn mainly due to improved local and foreign construction markets and buoyant demand for steel and allied products. Headline earnings a share climbed 87%, although the increase would have been 66% if a restatement of the 2005 figure – in line with accounting standards changes – was excluded. 
 
Grim said government was applying a sense of urgency to infrastructure delivery. "This commitment is quickly translating into reality", he said. Demand for civil works had climbed. "Civil engineering has been very attractive and that was a major boost. This has all sorts of run-ons in our group," he said. 
 
Grim said Holcim SA’s performance was a little disappointing, largely due to extraneous factors such as Spoornet’s service, a price war in Namibia and the cost of imports to overcome shortages. 
 
"Spoornet continues to cost us a lot of money," he said. Aveng understood that it took a long time to turn around a big ship, said Grim, "but we’re suffering". 
 
Holcim SA’s revenue increased 14% to R4,5bn and operating income rose 5% to R1,2bn. Holcim SA is the second-largest cement maker in SA. 
 
Commenting on cement demand Grim said: "It’s been one hell of a party".