| Fri 22 Oct 2010, 10:00 | | AEG - Aveng Limited - Business Update |
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AEG
AEG
AEG - Aveng Limited - Business Update
AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000111829
SHARE CODE: AEG
("The Aveng Group" or "Group")
BUSINESS UPDATE
The Aveng Group continues to weather tight market conditions by managing its
current portfolio effectively through cost savings, margin improvements, the
recently announced share buy-back programme and an ongoing search for
appropriate acquisition opportunities.
Although the Group`s potential order pipeline remains stable at R110bn, its two
year order book has declined by 6% from R31,1bn at 30 June 2010 to R29,3bn as of
30 September 2010. The prevailing market conditions are anticipated to continue
into 2012.
The South African environment continues to be impacted by delays in contract
awards, particularly in the public sector. The Group believes that public
private partnerships could serve as a catalyst to fast-track infrastructure
development. The stronger Rand should bode well for local infrastructure
development given the lower than forecast Rand values of importing capital
intensive infrastructure components.
The outlook for the mining sector remains encouraging, supported by an upward
trend in commodity prices and strong demand from China. The current strength of
the Rand, however, will negatively affect foreign earnings from Moolmans.
Within the Construction cluster, Grinaker-LTA has been awarded significant
projects in the first quarter, including a contract valued at R211m for the
Medupi Power station in Lephalale and a civils contract for the Kgalagadi
Manganese Sinter Plant in Hotazhel for R108m. McConnell Dowell has been awarded
several contracts during the quarter including the Breakwater Road Alignment
Project in Victoria, Australia, valued at AU$43m; a project for Queensland Gas
Company worth AU$35m; and the Koniambo Nickel Mine project in New Caledonia,
worth AU$31m. Significant opportunities are being targeted in the coal seam gas
sector in the Gladstone area in Queensland.
Moolmans has secured several contracts in Southern and East Africa including the
Geita Gold Mine contract in Tanzania valued at R434m and KCM Rehandle in Zambia
worth R363m.
Tender delays have constrained volumes in the Manufacturing and Processing
cluster, with margins under pressure due to lower steel prices and an
increasingly competitive market. Although Trident Steel`s volumes stabilised in
the quarter, the impact of the public servants and automotive strikes tempered
overall growth of the market. The only exceptions were in precast railway
sleepers and rail track work, which exceeded forecasts.
In respect of Competition Commission matters, shareholders were advised in the
SENS announcement of 10 August 2010 that the complaint involving the Steeledale
Mesh business unit of Steeledale was set down in the Competition Tribunal for
the hearing of evidence and argument in November 2010. Due to procedural
delays, hearing of evidence will take place during the week of 28 February 2011
and oral arguments will be heard on 11 March 2011.
The Group`s balance sheet remains strong, which ensures its defensive position
in these difficult trading conditions, and management is focused on ensuring
that Aveng secures a material proportion of available work within its targeted
markets.
Sandton
22 October 2010
Sponsor:
J.P. Morgan Equities Limited
Date: 22/10/2010 10:00:01 Produced by the JSE SENS Department.
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