Tuesday, 21 October 2008 02:00

Gautrain carriages to creates jobs

The first phase of Gautrain is expected to start operating at the end of June 2010 between OR Tambo and Sandton, and it will be fully operational in March 2011.

Wednesday, 03 September 2008 02:00

New arrivals facility at OR Tambo opens

Wednesday sees the opening of the first phase of the R2.3bn central terminal building at Johannesburg's OR Tambo international airport.

Tuesday, 08 July 2008 02:00

Absa Capital buys 8% stake in Gautrain

ABSA Capital’s Infrastructure Equity Investments has acquired a direct 8% shareholding in the Gautrain.

Government is to spend R70 billion to upgrade and improve some road networks in Gauteng through the Gauteng Freeway Improvement Project (GFIP) budgetted over various phases until 2018.

Thursday, 22 May 2008 02:00

Esor thrives on building boom

Geotechnical engineering specialist Esor on Wednesday reported a threefold increase in revenue to R1bn for the year to February as it benefited from commercial and government infrastructure spend and a building upsurge in Angola and Mauritius.

Construction IndustryCEO Bernie Krone said today’s buoyant construction market was the primary driver for the group’s organic growth.

“The Gautrain continues to be a major contributor. We have R400m worth of work for the high- speed train which will be world class, with 14 months’ worth of work,” Krone said.

Of the R420m worth of projects secured, R170m was completed during the year.

“The Gautrain … is stimulating major development within the radius of its stations’ use areas, which will dramatically alter the urban landscape and further boost the construction industry beyond 2010.” The many new developments in the pipeline included high-rise offices, hotels and retail and commercial building projects.

The group has completed piling projects for Airports Company SA at the new King Shaka and Cape Town International Airports and contracts for piling, pedestrian culvert jacking and lateral support at OR Tambo International Airport.

Work on stadiums for the 2010 World Cup has been completed at Athlone Stadium in Cape Town, Moses Mabhida Stadium in Durban and Port Elizabeth Stadium.

Profit came in at R116m from R34m a year before.

Headline earnings per share jumped 240% to R115m, equating to 51,3c per share while net asset value per share increased 46% from 109,8c per share to 160,3c.

The group declared a final dividend of 20c per share for the year for a total of R49,6m.

Krone said the group was entrenching its presence in Africa, building on subsidiary Franki’s foothold in oil-rich Angola. Contracts for piling, lateral support and marine works projects were completed during the year.

Stringent cost control kept operating margins steady despite the negative effect on the group of unusually abundant December rains.

“We did see a slight decrease in margins in the final quarter of the year since excessive rain in Gauteng slowed down projects before and after our year-end break.

“However, a stricter focus on operational efficiencies and aggressive investment in plant helped keep margins on a par with last year,” Krone said.

Esor invested R147,5m in new equipment during the year.

Krone said the current year would be an acquisitive one, but the group would look only at companies that made good business sense and in the geotechnical engineering sector.

 

Thursday, 08 May 2008 02:00

PPC to raise cement prices again in July

PPC, which has already increased the price of its cement 8,5% this year, said the hike of about 5% in July was meant to bring cement prices in line with March’s producer price inflation of 11,8%.

Construction IndustryThe increase will drive up construction costs generally, and the costs of the government’s infrastructure spending programme.

PPC CE John Gomersall said the increases were needed due to higher input costs, such as electricity, fuel and transport, which he said had risen well above producer inflation. He said the rise in the price of cement was a global phenomenon, and prices were being pushed by rising energy costs.

“Our electricity costs have increased 14% already; coal has gone up 30% on average; diesel is up 28% and our delivery costs have gone up 19% for the year to date.

“W e expect another increase in July to bring our overall increase for the year above 11% ,” he said. An increase in the price of cement is set to result in a further escalation in construction costs and, in particular, drive up the cost of the government’s infrastructure spending programme now worth more than R500bn, as well as projects such as the Gautrain.

Increased costs in the government’s infrastructure project will put a heavier burden on the national purse. Higher prices could also have further inflationary effects.

Higher costs are also likely to contribute to a slowdown in the residential property development sector, which is already feeling the pinch of higher interest rates and the National Credit Act.

The price of cement and other building materials have soared considerably in the past couple of years due to a boom in the construction sector, driven largely by government investment in infrastructure in preparation for the 2010 Soccer World Cup.

The increase in prices prompted the Competition Commission in October last year to look at the building materials and construction sectors with a view to investigate anticompetitive practices that might have driven up the costs of the government’s spending.

The commission has been concerned by some trends, including price increases in construction running substantially above inflation.

At the time, the commission noted building material prices were up about 80% since 2000 and across a range of items, from bricks to cement to steel.

Yesterday PPC announced healthy results for its half-year to March, despite a slight decline in regional demand for cement. Revenue grew 13% to R2,9bn, and operating profit rose 9% to R1,077bn compared with the same period last year. Headline earnings per share improved 16%, boosted partly by a reduction in the effective normal taxation and secondary tax on companies. The company declared a dividend of 45c a share.

PPC said demand for cement in southern Africa fell 1,3% for the period due to the combination of high rainfall, the Easter holidays falling in March this year and a softening of demand from the residential sector.

The residential sector had largely been hit by the combined effects of the National Credit Act and higher interest rates, while high rainfall had slowed expansion projects.

The company said the decline in residential construction was likely to limit industry regional cement demand growth this year to between 2% and 4%.

However, Gomersall said the effects of the slowdown in the residential sector had been offset by the continued increase in government and private sector infrastructure spending.

PPC’s share price gained 69c, or 1,8%, to R39,64, yesterday, valuing it at about R21bn.



Wednesday, 12 March 2008 02:00

Civil engineering powers ahead

While the residential and nonresidential construction market is heading for slow growth this year because of higher interest rates, the civil construction sector is expected to grow 33%.

Construction IndustryLocal construction companies stand to benefit from the boom that is expected to carry on until at least 2015, influenced largely by governmental infrastructure spending of R560bn over the next three years.

Coupled with this is Eskom’s R1-trillion budget to build power stations, Transnet’s building of railway lines, ports and fuel pipelines, and private sector expansion programmes.

Strong demand and rising commodity prices are also driving expansion in the mining sector, which will benefit the construction sector.

According to Reserve Bank data, the value of construction works reached an estimated R46bn last year, a 32% increase in real terms from R34,7bn in 2006.

South African Federation of Civil Engineering Contractors (Safcec) economist Pierre Blaauw says the estimate is an annualised figure, with the final number due at the end of this month. “Turnover this high was last seen during the construction boom in the 1970s, when the industry recorded a figure breaching the R40bn mark for the first time,” Blaauw says.

“Safcec’s numbers indicate growth between 25% and 30% for the civil engineering industry alone last year.”

He says the good news is that spending on the government's R560bn infrastructure budget started only last year and that this year and next should see further growth for the industry.

“We expect a 13%-16% increase in civil engineering industry turnover this year. It may sound small compared to last year’s record number, but this comes off a higher base,” he says.

Despite challenging macro economic conditions, infrastructure spending is steaming ahead, which bodes well for the industry, which has experienced 80% growth in turnover since 2004.

Blaauw says infrastructure spending is a prerequisite to maintain economic growth.

Blaauw says the biggest challenge the civil engineering industry will face this year will be capacity constraints. Companies will need to increase their capacity by acquiring new capital assets, locating and securing the necessary skills, buying up smaller firms, and expanding their education and training budgets.

Most big construction companies are already at work on projects such as the Gautrain, stadiums, and upgrading of airports and ports.

The likes of Murray & Roberts, Aveng and Group Five are either part of infrastructure development programmes or are bidding with international groups to build power stations and big projects.

Cadiz African Harvest portfolio manager Rajay Ambekar says gross fixed capital formation had peaked at about 30% in 1976 but has since been coming down to the current 15% of gross domestic product (GDP). “The target is 25% of GDP,” Ambekar says.

International construction companies are partnering with local companies that are unable to cope with the load and lack expertise, especially for big projects. “No South African company can build a power station on its own. A lot of civil construction would be done by local companies while technical expertise is brought by international companies,” Ambekar says.

However, he says there is a risk of delays that are outside companies’ control, which could be costly. Blaauw agrees, saying there will be more supply-side constraints than demand-side constraints.

According to Statistics SA, the construction industry showed the biggest jump of all economic sectors in acquiring capital assets from 2005 to 2006, recording a 73% increase. Salaries and wages rose 16,6%. Blaauw says it is likely the industry will have doubled in size between 2004 and next year. .

In 2006 there were four large international construction firms registered with the Construction Industry Development Board, rising to 11 last year.

“We are likely to see a further increase in competition from abroad over the next two to three years, as well as from smaller companies growing into larger firms able to compete for bigger contracts.”

 

Friday, 29 February 2008 02:00

Gautrain to get extra R1bn from province

The Gautrain project will get an extra R1bn injection from the provincial government’s reserves to reduce its borrowing from R5,2bn to R4,2bn.

Friday, 11 January 2008 02:00

SA cement sales up

The 2010 Soccer World Cup stadia, some new dams and the Gautrain project should add to cement demand in the current year

Friday, 11 January 2008 02:00

Gautrain leaves black contractors behind

Black-owned construction companies are spoiling for a fight with the government over the Gautrain project

Page 7 of 11

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