South African downturn?

South African downturn?
Published: 18 March 2005

SA’s largest construction company, Aveng, did well in the residential and retail boom, through its ownership of steel supplier Trident and almost half-ownership of cement supplier Holcim. Improved sales in its cement and steel and allied divisions helped the group report a 55 per cent increase in headline earnings a share in the six months to December. But Aveng’s construction work, the group’s core activity, is still operating at a loss.
One of the features of the reporting season was the effect of problem contracts on the profits of SA’s two largest construction companies. Both Aveng and Murray & Roberts have admitted that much of their woes came from badly selected contracts. They have put in place improved risk management processes. 

Basil Read is hoping to start turning around under its new South African management. In the year to December, the company posted a R40m net loss compared with a R40m profit in the year before. The company was also troubled by a problem contract in Namibia. All of SA’s large construction companies were affected by the strong rand - and by the seemingly never-ending wait for government to start consistently delivering large projects.

The sector is still waiting for substantial government contracts to start materialising, and as it does so, it continues to retrench hundreds of people who may be needed again when government starts fulfilling its promises. Murray & Roberts retrenched about 500 people in the six months to December.