SA's second-largest construction company, Murray & Roberts, retrenched about 2000 people in the six months to December as the company bled from the effects of the strong rand.

Murray & Roberts CE Brian Bruce said yesterday the group had now resized in proportion to the level of activity in the market. It would be able to take on fewer, more profitable, contracts.

The strong rand and problematic contracts in Africa and the Middle East saw revenue drop R1bn to R4,2bn, while operating profit fell 28% to R187m.

The group's operating margin had slipped below the targeted 5% to 4,5%.

Headline earnings were maintained at 71c a share, however. The results were in line or slightly worse than most analysts' expectations.

Murray & Roberts and counterpart Aveng, whose profits were expected to fall 50%, specialised in major projects. These were being terminated or delayed as the strong rand took its toll on export earnings, particularly in the mining sector.

Murray & Roberts' construction division was one of the worst-performing segments in the group. Operating profit from these activities fell to R32m from R68m and revenue dropped to R1,75bn from R2bn. The margin was almost halved from 3,4% to 1,8%. Murray & Roberts' order book at R4bn in December was also 12% lower over the first six months of the year. Almost half this reduction was the result of awarded project terminations in the domestic mining sector, which was being hurt by the strong rand.

Problematic contracts outside SA's borders also had a big hand in the construction division's woes. A reversal in operating profit of R8m in the roads sector and R30m in the Middle East were recorded, compared with the corresponding period, the group said.

The group's automotive and transport manufacturing division was also particularly hard hit by the rand's strength. The operating profit in this division fell to R24m, from R60m, on revenues of R484m, from R670m. The margin fell to 5%, from 9% in the corresponding period.