Aveng’s revenue remains flat amidst tough mining market - CNBC Africa

Aveng’s revenue remains flat amidst tough mining market


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Aveng is a South African company specialising in steel, engineering, manufacturing and mining. PHOTO: Wikipedia

Both markets experienced slowdowns in mining related infrastructure spend, specifically in South Africa where there were low levels of mining activity due to labour disruptions.

The group’s performance was also significantly impacted by a direct loss of 179 million rand from its Australian based McConnell Dowell’s Gold Coast Rapid Transit Project.

However Aveng said that the impact of the labour disruptions during the financial period were subdued compared to the 2013 financial year.

(READ MORE: Aveng reports subdued FY results)

As a result, total group revenue remained flat at 53 billion rand, compared to last year’s 52 billion rand.

[DATA AEG:Aveng Limited] is a South African company specialising in steel, engineering, manufacturing, mining, concessions, public infrastructure and water treatment. The group also provides multidisciplinary services in construction and engineering.

Group net operating earnings grew by 20 per cent to 784 million rand due to a 42 per cent reduction in net operating losses at the company’s South African based construction and engineering division, Aveng Grinaker-LTA, as well as a 55 per cent increase in earnings at its Manufacturing and Processing segment.

Earnings per share declined by 182 per cent to a loss of 101.9 cents while headline earnings per share fell by ten per cent to 112.5 cents.

The company’s board resolved not to declare a dividend due to adverse cash flows.

(READ MORE: Aveng reports revenue growth amidst weaker full year results)

Aveng Mining Shafts and Underground posted a significant 147 per cent hike in net operating earnings.

Earnings from equity- accounted and other investments increased from 29 million rand to 66 million rand due to profits from the company’s renewable energy contracts and McConnell Dowell’s Middle East investments.

In Aveng’s construction and engineering businesses in Australasia and Asia, multi-year mining and infrastructure contracts contributed to ongoing revenue growth despite challenges in Australia’s commodity sector.

In South Africa’s construction industry, which generates 88 per cent of Aveng’s construction revenue, remained weak and was characterised by low levels of activity, strong competition and heavy rainfalls in March this year which disrupted sites.

 The mining segment, which continued to benefit from its diverse client and commodities portfolio, was impacted by pricing and cost pressures, resulting in an 11 per cent decrease in revenue to 6.6 billion rand.

The manufacturing segment however had a strong year, specifically the infraset and Lenning Rail Services businesses due to increased transport related opportunities in sub-Saharan Africa. The group has already expanded into Mozambique and Zambia and has plans to breakdown silos and cross-pollination across the segment.

Aveng Steel however was faced with lower demand from the construction industry due to industrial strike action in the automotive, construction and mining sectors, resulting in a four per cent decline in revenue to 7.2 billion rand. Increased competition also led to overstock in the steel industry.  

(WATCH VIDEO: Aveng - Hot or Not - CNBC Africa)

The group said that it plans to improve liquidity over the short term and address its fixed cost base by focusing on improving operational performances and cash generation.