Construction industry on shaky ground



27-11-2015
Read : 113 times
The Sowetan
Source

CRACKS are showing in the construction industry after the sector ’ s major players saw their combined value on the Johannesburg Stock Exchange collapse by 38% in 2015.

A survey that accounting and auditing services firm PwC released yesterday showed that eight of the nine heavy construction firms surveyed reflected a decrease in market capitalisation, with Aveng and Esor showing the largest individual decreases. Calgro M3 was the only company that showed an increase in market capitalisation.

“In aggregate for the nine companies analysed, market capitalisation decreased by 38% to R25.9-billion as at 30 June 2015 compared to R41.6-billion during the same period last year,” read the report.

It said the 2015 financial year got off to a poor start, with the construction industry being rocked by a metalworkers ’ strike in July 2014.

“[ There were] further instances of labour unrest internally and at clients and suppliers thereafter. This resulted in delays on significant projects in the country,” it said.

However, after June the market capitalisation of WBHO and Calgro M3 started reflecting an increase, while the JSE value of the remaining seven companies continued to fall. “In aggregate, the nine companies analysed [showed] a further 9% decline over the three months from 30 June 2015 to 31 October 2015,” said the report.

The report said the private sector, often led by the mining industry, was another big player in the industry, and has been a significant contributor to total construction expenditure.

“However, the severe pressure experienced in the mining sector, with shrinking margins due to volatile commodity prices and labour unrest, will no doubt have an impact on future demand,” it said.

PwC assurance partner Andries Rossouw said: “The SA construction industry is well placed to cope with new growth requirements as well as take on large-scale projects. But it will need to manage shortterm liquidity requirements.”

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