Murray & Roberts lowers growth forecast

CEO Stewart Mangoma told analysts on Tuesday that there had been a slow start to the financial year owing to the liquidity crisis that is threatening to affect the growing concern of the business.

In terms of performance, the construction order book was at US$36 million, with 65% of the orders in the mining sector.

However, with the uncertainty in the mining sector over the implementation of the indigenisation requirements, analysts say the bulk of the projects might not be realised.

Mangoma said that 56% of the book would be fulfilled in the current year while 44% would be carried to the next year but noted that there was a general lack of big infrastructure projects.

“The projects are short term but much better than last year,” said Mangoma.

The division had an order book of US$30 million at year end but some of the projects had been deferred.

Tendering activity had however improved in mining and government projects, with an improvement in margins in the civil jobs, he said.

Turnover in the interim period to December had fallen 4,6% below the budget of US$23 million at US$22,02 million. Performance was, however, 71% above the same period last year.

Revenue in the construction division increased by 108% from prior year, largely because the industry was coming from a low base.
In terms of client contribution, government was on 35%, mining 45% and private companies at 20%. Of the contracts, buildings were 54%, civils 39%, fabrication 7% and there was nothing on roads and networks, he said.

Mangoma said at peak in 1998 revenue was US$90 million but the budgeted full year revenue was at US$38 million, which was 40% of the peak. The group reported a pretax profit of US$1,02 million and after tax profit of US$755 504 translating into earnings of US0,35c per share.

Manufacturing’s contribution to revenue had increased to 62% from 2010 and construction was on 38% down from 49%.

Manufacturing prospects were looking dim, as there were no major projects and the unit had a low order book for the second half. This, Mangoma said, was because of the liquidity pressures which were affecting demand from merchants.

Manufacturing volumes traded were 19% above the prior year. Manufactured volumes increased 73% to 1 800 tonnes, but Mangoma said margins declined due to increased competition from China and SA alternatives, which forced the group to look at re-pricing its products.