BUILDERS STILL BUSY DESPITE DOWNTURN

SA’s bigger construction companies seem to be holding their own at a time when other sectors are feeling the effects of the global financial crisis.  
 

Several of these companies have continued to post strong results in recent months, with earnings showing double-digit growth. New orders have also continued to stream in.  With a private sector weakened by the credit crisis, the Government’s guaranteed multibillion-rand infrastructure programme has played a major part in keeping the sector afloat.  Although most of the companies have reported that operating and profit margins have recently come under pressure, many say they have orders that will see them through the next 12 months and beyond.  

Investment has been hit hard by the global credit crunch, resulting in the cancellation of orders. The interest rate-sensitive residential building sector in particular has taken a big knock, with some analysts saying it will be a while before it recovers. With most firms focusing on public sector work, increased competition may eat into future margins.  However, diversification of capabilities across the construction and engineering sectors, as the sector consolidated in the past couple of years, have helped most groups mute the effects of slower demand in some markets.  

This week civil engineering and construction company Stefanutti Stocks led the pack with strong results when it reported that it more than doubled revenue and net profit for the year to February, boosted largely by strong organic growth and some strategic acquisitions.  Revenue jumped 144% to R6,3bn while net profit after tax grew 121% to R319,4m. Headline earnings of R299,3m translated into headline earnings per share of 185,4c, a significant increase from 103,7c the previous year.  

CEO Bernard Krone says the economic downturn is not giving him sleepless nights. He says a raft of infrastructure developments, including the Gautrain, the 2010 Soccer World Cup and roadworks, are keeping construction and civil engineering firms busy.

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