| Tue 20 Mar 2001, 0:00 | | AVENG - CONSOLIDATION IS THE KEY WORD |
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Johannesburg - Tuesday March 20, 2001
The strategy of South African company, Aveng Limited to become a globally competitive construction-related group focussed principally on the developing world is taking shape.
Having acquired LTA Limited last year and having successfully integrated LTA with Grinaker into a new company, Grinaker-LTA, Aveng is now focusing its attention on Stage 2 of its strategy - to consolidate its businesses to serve three select niche markets - energy, mining and infrastructure.
Managing director Carl Grim explained: "For the next year or two we will be making sure that our construction business Grinaker-LTA is globally competitive in its chosen services areas and in its selected geographical regions which are Africa, the Middle East and Australasia."
He said that in this period, Aveng is unlikely to make any large acquisitions. "We may make smaller acquisitions in certain niche areas where adding specific skills will round out the products and services that we can offer customers, but our thrust for the next while will be on getting our business into the best possible shape. Stage 3 of our growth strategy will then follow and that could involve some major international acquisitions."
Mr Grim outlined the progress the group has made in achieving the objectives it set itself at the time of listing in mid-1999. "At that stage we said that we would nurture the stable profit-earning and cash-generating capacities of our South African-based businesses - steel (Trident); cement (Alpha) and construction (Grinaker) - and from that solid foundation we would launch our growth plans in construction.
"We decided to focus on the developing world and build globally competitive capabilities in a few specialised niche markets. The acquisition of LTA last year brought to Aveng the complementary capabilities and skills necessary to provide selected customers with an integrated one-stop service. At the same time, with its substantial African expertise, a meaningful presence in the Middle East and its Australian subsidiary McConnell Dowell, LTA also facilitated our expanding geographically. This was in line with our stated strategy of concentrating on hard currency contracts in Africa and entering other areas of the developing world through joint ventures, strategic alliances or by acquisition."
He added that as soon as the group was certain that Grinaker-LTA could hold its own as a leading developing world contractor to the energy, mining and infrastructure sectors, it would then look further afield to grow again.
"Grinaker-LTA may look like a large business within South Africa but the projects for which we are tendering are often international and we come up against the major global players all the time. To compete internationally we have to be big and must therefore look at acquisitions in the future"
The largest international construction company with a South African subsidiary (Cementation) is the Swedish firm Skanska which had construction revenues of almost $17-billion in 1999. This makes it 21 times larger than Grinaker-LTA. French firm Bouygues, which has Basil Read as its local subsidiary and is 14 times larger than Grinaker-LTA, had construction revenues of almost $12-billion in 1999.
"And there is Hochtief, the German construction company, represented locally by Concor, which is 10 times larger thank Grinaker-LTA and Dragodos, the Spanish firm, which also operates in South Africa, is five times our size.
"These are all substantial competitors with large balance sheets and considerable capability. Right now, as a tadpole in the global construction world, our strategy has to be that of building world class capability in tightly defined niche markets, but the time will come when we look to stretch our horizons again. Consolidation and specialisation will be our thrust for the next year or two, the rest will follow later," Mr Grim said. Please note:
Aveng Limited is a South African based construction-related group. It was listed on the JSE Securities Exchange in July 1999 and is aiming to be a globally competitive construction-related company focused principally on the developing world.
Its major businesses are
* Grinaker-LTA Limited - South Africa's largest construction company organised into three divisions: Grinaker-LTA Construction and Development;
McConnell Dowell which is listed on the Australian and New Zealand stock exchanges and in which Aveng holds 64%, and Grinaker-LTA Engineering and Mining Services. Aveng holds 100% of Grinaker-LTA.
* Trident Steel (Pty) Limited - South Africa's second largest steel merchant. Aveng holds 100% of Trident.
* Alpha Limited - South Africa's second largest cement manufacturer. Aveng holds 46% of Alpha and the Swiss group Holderbank, the world's largest cement manufacturer, holds 54%.
Aveng's objectives are to
* Achieve a PE rating in the top three of the BCE sector
* Long-term real ROE of 10%
* 25% of earnings offshore by 2003
ends
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