Infrastructure boom drives Aveng

johannesburg - construction, steel and cement company aveng reported on monday that its diluted headline earnings per share for the year ended june 30 had lifted 85% to 535.7c.
it also announced that its total dividend would amount to 290c, up 71% from the 85 cents seen a year ago.

underpinned by improved performance from each of the operating groups, the company said operating profit escalated by 87% to r2.4bn. the operating profit margin also increased from 5.9% to 8.2%, which exceeded the medium term target of 8% that was set two years ago.

"we are very pleased with the performance of all our businesses which have leveraged the opportunities in the current buoyant market," states newly appointed chief executive officer, roger jardine.

the group received net interest of r853m, compared to r74m in the previous year. this was due to higher average cash balances and higher effective interest rates over the period. cash generated by operating activities of r5.6bn shows a r2.9bn improvement over 2007.

"demand in the construction, mining and engineering environment remained strong in the economies where we primarily operate, namely southern africa, australasia and the pacific," says jardine.

he continues to explain that activities have largely been driven by the ongoing public sector infrastructure investment programmes as well as the demand for commodities which is driving material new investment in the mining sector.

"in our view these conditions are likely to continue for some years as there is a general need to deal with the infrastructure spending backlog in many of the countries in which we operate," he says.

the construction and engineering cluster comprising grinaker-lta, e+pc and mcconnell dowell, lifted revenue by 42% to r18.7bn. performance improved by 124%, with operating profit of r964m, reflecting an operating margin of 5.2% from 3.3% last year.

prioritised safety

opencast mining, comprising moolmans traded well with a 36% increase in revenue to r2.4bn. despite pressure on operating expenses, the company increased operating profitability by 105% to r190m.

the company said the infrastructure investment boom benefited the manufacturing and processing cluster, consisting of trident steel and aveng manufacturing with revenue increasing by 20% to r8.5bn and operating profit 41% to r1.4m.

it added that the demand for commodities such as coal and iron ore seems to be stable at these high levels driven largely by the growth of china and india.

however, shortages and price increases of some raw material, as well as a global scarcity of experienced and qualified people, "is putting pressure on project costs in this industry".

"with a heightened focus on growth and performance, we also prioritised safety. the awareness of our safety slogan, 'home without harm, everyone everyday', is driven hard by all the operating groups", says jardine.

the group's disabling frequency rate (difr) decreased to 0.59 against a short-term target of 0.5. mcconnell dowell and e+pc recorded excellent difrs of 0.19 and 0.20 respectively.

there was a 36% increase in the two year order book to r25.8bn. grinaker-lta's two year pipeline is valued at r9.5bn and mcconnell dowell's at r11.5bn. moolmans has a two year order book of r4.3bn. "these operations have all made significant investments to nsure that we have adequate capacity to deliver on these opportunities," explains jardine.

"steel prices are expected to stabilise and demand should remain strong. as a result, trident steel should continue to perform well while aveng manufacturing is positioned to benefit from the general infrastructure surge," said the company in a release.

jardine concludes: "we are on track to deliver further earnings growth as our order book is strong, our operations are well tuned."