M&R expects profit despite rand strength

Posted On Tuesday, 28 October 2003 02:00 Published by eProp Commercial Property News
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Working capital pressure in Middle East

Brian BruceCONSTRUCTION group Murray & Roberts says the stronger rand will see a slowdown in the group's rate of growth.

Murray & Roberts CEO Brian Bruce said yesterday that although the strong rand would make life challenging the group still expected to post a profit in the current financial year.

Bruce said the effect of the local currency on the group should be seen in context. When the rand was weak the construction industry benefited, now that it was strong the sector was taking a strain.

An analyst said that because the rand remained strong companies such as Murray & Roberts were forced to revise their outlook.

According to the analyst, many companies had expected the rand to soften by now, but its continuing strength was making it difficult for them to operate.

Besides the rand, working capital concerns in the Middle East and a decline in activity in the mining sector also hung over the group. Bruce said the increased pressure on the group's working capital in the Middle East was a result of expansion there.

Along with the expanding operation, late payments in the region saw the group decide to take a provision against client payment risk. Bruce said it was not out of the ordinary for a construction company to wait as long as 180 days for payment.

The slowdown in the mining sector also cast a shadow over the construction industry. Bruce said mining houses were holding off on new projects until the Mining Royalties Bill was passed into law.

Murray & Roberts said while its order book remained under pressure, there was evidence new projects would come through in the new calendar year. However, these projects would only show up in the group's figures for the 2005 financial year.

Murray & Roberts said the upturn in the domestic and regional construction and building markets was continuing. This recovery was supported by the recent reductions in interest rates and the low inflation rate.

The group said the sector was also boosted by increased government expenditure which benefited its supply and services companies.

Murray & Roberts' said its automotive and rolling stock operations were "largely shielded" from currency volatility and were experiencing an improvement in demand.

The group said the sale of 50% of Alloy Wheels International (AWI) SA to Borbet of Germany passed all regulatory hurdles. AWI will now be known as Borbet SA.

The empowerment partnership with diversified investments company the J&J Group headed by former government minister Jay Naidoo and its transport subsidiary, UCW was on track, the group said.

The Bombela Consortium, in which the group holds a significant stake with local empowerment and international partners, submitted a comprehensive proposal for the Gautrain Rapid Rail Project.

The firm said its cash position was strong and the operating margin was expected to remain within the target band of 5,0% to 7,5%.

Murray & Roberts closed down 1,59% or 20c to R12,35 with 311808 shares traded in 169 deals yesterday.


Last modified on Saturday, 26 October 2013 11:13

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