M&R’s order book rockets on US project

29-08-2019
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Moneyweb
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Sees further opportunity for oil and gas and underground mining platforms to grow order books.

Murray & Roberts (M&R) grew its order book by 55% to R46.8 billion in the year to June, with near orders rocketing by 82% to R14.4 billion from R7.9 billion.

Subsequent to the group’s year-end, the oil and gas platform secured the R8.7 billion project recorded as near orders in its order book.

Henry Laas, M&R’s group chief executive, said on Wednesday the implementation of the group’s strategy as a multinational provider of specialised engineering and construction services, primarily in the metals and minerals, oil and gas and power and water market sectors, was showing strong delivery.

The near order secured related to M&R’s announcement earlier this month that Clough USA, part of the group’s oil and gas engineering and construction subsidiary Clough, had been awarded a $620 million petrochemical engineering, procurement and construction (EPC) project in the United States.

Laas said strong growth had been recorded in the oil and gas platform order book and there was an opportunity for both the oil and gas and underground mining platforms to further grow their order books.

M&R’s oil and gas order book grew to R22.8 billion in the year to June from R6.4 billion in the previous year.

The underground mining platform had an order book of R22.8 billion at end June, with near orders valued at R5.2 billion.

Laas said the lower and declining order book in the power and water platform was reflective of the Medupi and Kusile power station projects nearing completion and prevailing market conditions in South Africa.

The power and water platform order book declined to R900 million from R1.5 billion in the previous year, with R500 million in near orders.

The underground mining platform achieved a record operating profit of R814 million in the year to June, 72.8% higher than the R471 million in the previous year.

However, M&R’s oil and gas and power and water platforms both recorded losses in the period.

Group attributable earnings increased by 26% to R337 million in the year to June from R267 million in the previous year despite group revenue from continuing operations declining by 7% to R20.2 billion from R21.8 billion in the same period.

But diluted continuing headline earnings a share decreased by 10% to 101c from 112c.

The group declared an increased gross annual dividend a share of 55c compared to 50c in the previous year.

Laas said the underground mining platform delivered an outstanding result in a buoyant market in the year.

He said commodity prices had generally been stable in the last two years, resulting in greatly improved balance sheets of many mining companies. “Although a few greenfields projects have come to market, many mining houses have mainly invested in brownfields projects extending the capacity and lives of existing mines.

“In the context of a recovery in commodity markets, the platform has done well to capitalise fully on its growth potential, substantially growing its regional market shares,” he said.

Laas added that although the group believes there was still considerable opportunity for the underground mining platform, it expected earnings to show measured growth from current levels.

The oil and gas platform reported an operating loss of R98 million in the year to June compared to a R209 million operating profit in the previous year as revenue decreased to R6.7 billion from R8.5 billion.

Laas attributed this primarily to a delay in the progressing and awarding of new projects resulting in insufficient project earnings to cover overhead costs, and losses incurred on two, now largely completed projects.

The power and water platform recorded an operating loss of R32 million in the year to June compared to an operating profit of R134 million in the previous year as revenue decreased to R2.5 billion from R4.8 billion.

Laas said the loss was due to reducing levels of revenue with limited new project opportunities in South Africa, together with a loss incurred on a project for Sasol, which was in dispute.

He said the sustainability of this platform was dependent on the level of investment in the South African economy, which had been disappointing in recent years, but the group expected the platform to return to profitability in the medium term.

Shares in M&R rose 2.71% on Wednesday to close at R11.35