Construction Sector puts focus on planning
Many construction firms have reported declining profits in the last few years, mainly as a result of the global financial crisis and a lack of civil engineering activity.
But at the recent Macquarie Construction CEO Conference held in Johannesburg, the companies detailed their strategies to cope with difficult infrastructure markets.
Markets have recently gone from bad to worse on the global mining commodities rout and a worsening longterm slump in demand for steel products used in infrastructure.
This has seen the market capitalisation of many JSE-listed infrastructure groups drop in recent years, including for major companies with attractive price:earnings multiples such as Murray & Roberts and Aveng.
Murray & Roberts said in its presentation to the conference that it was pursuing a new strategic future to 2020. This would see it become a diversified international engineering and construction group focused on natural resources markets.
Strategic priorities included resolving historical claims in respect of the Gautrain tunnel water ingress and a contract to build a concourse at Dubai international airport. The group said it would diversify its business model into higher margin sectors, including boosting engineering, procurement and construction, and also project management capabilities.
Meanwhile, WBHO said it did not foresee major changes in 2016-17. Roads and earthworks margins in SA were under pressure and a lack of civil engineering activity was a concern, it said. However, the country’s electricity crisis was creating further opportunities in the energy sector and building order books were healthy until the end of financial 2017.
Building opportunities were still available in the rest of Africa, it said, but mining work was limited. In its key Australian markets, the building order book remained at record levels.
WHBO said the repositioning of its civil engineering business away from a subdued mining sector was on track.
Smaller construction group Basil Read said in its presentation that it had completed its organisational restructuring of the company into divisions, instead of subsidiaries. This would give it more cost-effective common administrative and management structures.
