As the tough conditions persist in South Africa‚ Australia has offered a lifeline for two of South Africa’s major construction companies.
Interim results out on Tuesday showed Wilson Bailey Holmes Ovcon (WBHO)‚ the largest construction company by market capitalisation‚ is reaping the benefits of its timely entry into Australia’s residential building market‚ where Asian investors are propping up demand.
Aveng said it remained optimistic about the long-term prospects for the Australian markets‚ even though revenue had declined as it completed multi-year projects in the six-month period.
WBHO reported a 15% jump in net profit to R376-million in the six months to December‚ as Australia’s buoyant residential building market offset declining revenues in South Africa.
“Two or three years ago, we used to build apartments that were 30 storeys high in Australia‚” chief executive Louwtjie Nel said. “Currently we are building apartments that are about 92 storeys high.”
Asian investors were commissioning high rises to cater for demand from students‚ mostly from China.
Australia was responsible for more than half the group’s R15.4-billion revenue.
Nel said the company had achieved a turnaround in its Australian operations‚ after learning some crucial lessons when it incurred losses on three civil works contracts in the oil and gas sector.
“Last year, we made no profit because of those‚ but we learnt our lessons very quickly‚” Nel said.
The company had then put more focus on the residential market‚ especially in Melbourne and Sydney.
Aveng’s earnings dropped a hefty 36% to R230-million in the six months‚ reflecting its heavy reliance on the weak local construction market where infrastructure spending has slowed down.
The company would sell its steel business and “monetise” Aveng Capital Partners‚ its investment business‚ to cut costs‚ chief executive Kobus Verster said.
This is after Aveng axed about 5000 employees during the period – 20% of whom were permanent staff.
The company’s local construction business‚ Grinaker LTA‚ is also looking to sell shares to black investors to help it qualify to tender for government contracts‚ particularly from municipalities.
Grinaker hopes this will help it pare losses.
The Aveng Steel division‚ which more than doubled its operational loss to R146-million‚ had already received several offers from both local and foreign investors‚ Verster said.
But he indicated there would be no fire sale.
“If we can’t get value for it‚ we will keep it.”
The steel division sale‚ empowerment deal‚ and monetisation of the investment unit would help improve return on invested capital in the medium term‚ Verster said.
Aveng’s mining order book dropped 20%‚ its local (including Africa) construction order book rose 5% to R7.7-billion‚ while its Australian and Asian orders grew 8% to A$1.3-billion for the next two years. Australia generates R2.5-billion of Aveng’s R18-billion in sales.
WBHO’s R35-billion total order book is also heavily weighted towards Australia‚ where it hopes to complete projects worth R23-billion in the next year.
Both construction companies‚ however‚ remained bullish about the domestic commercial building market.
WBHO said it had a healthy project pipeline for building work‚ while Aveng said new orders had grown 67% in the second quarter‚ and that the short-term outlook remained positive. — BDLive
Aussie boost for WBHO, Aveng
Interim results out on Tuesday showed Wilson Bailey Holmes Ovcon (WBHO)‚ the largest construction company by market capitalisation‚ is reaping the benefits of its timely entry into Australia’s residential building market‚ where Asian investors are propping up demand.
Aveng said it remained optimistic about the long-term prospects for the Australian markets‚ even though revenue had declined as it completed multi-year projects in the six-month period.
WBHO reported a 15% jump in net profit to R376-million in the six months to December‚ as Australia’s buoyant residential building market offset declining revenues in South Africa.
“Two or three years ago, we used to build apartments that were 30 storeys high in Australia‚” chief executive Louwtjie Nel said. “Currently we are building apartments that are about 92 storeys high.”
Asian investors were commissioning high rises to cater for demand from students‚ mostly from China.
Australia was responsible for more than half the group’s R15.4-billion revenue.
Nel said the company had achieved a turnaround in its Australian operations‚ after learning some crucial lessons when it incurred losses on three civil works contracts in the oil and gas sector.
“Last year, we made no profit because of those‚ but we learnt our lessons very quickly‚” Nel said.
The company had then put more focus on the residential market‚ especially in Melbourne and Sydney.
Aveng’s earnings dropped a hefty 36% to R230-million in the six months‚ reflecting its heavy reliance on the weak local construction market where infrastructure spending has slowed down.
The company would sell its steel business and “monetise” Aveng Capital Partners‚ its investment business‚ to cut costs‚ chief executive Kobus Verster said.
This is after Aveng axed about 5000 employees during the period – 20% of whom were permanent staff.
The company’s local construction business‚ Grinaker LTA‚ is also looking to sell shares to black investors to help it qualify to tender for government contracts‚ particularly from municipalities.
Grinaker hopes this will help it pare losses.
The Aveng Steel division‚ which more than doubled its operational loss to R146-million‚ had already received several offers from both local and foreign investors‚ Verster said.
But he indicated there would be no fire sale.
“If we can’t get value for it‚ we will keep it.”
The steel division sale‚ empowerment deal‚ and monetisation of the investment unit would help improve return on invested capital in the medium term‚ Verster said.
Aveng’s mining order book dropped 20%‚ its local (including Africa) construction order book rose 5% to R7.7-billion‚ while its Australian and Asian orders grew 8% to A$1.3-billion for the next two years. Australia generates R2.5-billion of Aveng’s R18-billion in sales.
WBHO’s R35-billion total order book is also heavily weighted towards Australia‚ where it hopes to complete projects worth R23-billion in the next year.
Both construction companies‚ however‚ remained bullish about the domestic commercial building market.
WBHO said it had a healthy project pipeline for building work‚ while Aveng said new orders had grown 67% in the second quarter‚ and that the short-term outlook remained positive. — BDLive
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