CANBERRA: Construction group Aveng has cut its reliance on SA for future work drastically, a move that could have negative consequences for employment already at record lows. Local building and engineering work would now contribute only 37% of Aveng’s pipelined projects for the next two years, SA’s largest construction company by revenue said on Tuesday after the release of its annual results. That compares to 56% in 2015.
Australia and Southeast Asia would play an increasingly important role in the group’s strategy to return to profitability, Aveng said. The region now accounted for 60% of its two-year order book of R28bn, up from 40% the previous year. In the past financial year, Aveng removed 8,500 workers from its payroll as part of a strategic initiative to contain costs and stop the haemorrhage of profit in the subdued domestic economy.
Of the jobs lost, about 2,000 were permanent staff, and the rest were contractors, according to a person familiar with the circumstances, who could not be named. The sector as a whole shed 13,000 formal sector jobs in the year to June, according to data from Statistics SA. “There is very limited growth in SA,” Aveng CEO Kobus Verster told investors as he explained the 23% plunge in group revenue to R33.8bn.
Revenue deteriorated as mining companies, such as Anglo American and its iron ore subsidiary Kumba — Aveng’s single biggest contributor to revenue — cut investments to stem losses from plummeting commodity prices. Further pressure was applied by the manufacturing sector after state-owned transport group Transnet revised its infrastructure spending downwards in 2015.
The stock was lambasted on Tuesday, crashing 10.76% to R5.31, paring its gains made since January to 134.96%, according to Iress data. This was despite Aveng halving its headline loss to 75.2c per share, compared with 144.3c per share in June 2015, mainly as a result of the improved performance from Grinaker-LTA. The JSE’s construction index has gained 7.56% since January, versus the 4.47% increase of the all share index.
