BUILDING AND CONSTRUCTION
Sephaku warns of earnings fall as industry wilts
Sephaku Holdings (SepHold) says in a dismal trading update that it expects earnings to plunge in the year ended March.
This comes as the Master Builders Association North — which represents building and construction interests in Gauteng, the North West, Mpumalanga and Limpopo — says the construction industry is in a "state of emergency".
It says factors that have contributed to the industry’s decline include shrinking margins, an increase in contract-related penalties and nonpayment or delayed payment by private and public sector clients.
SepHold has a 36% stake in Dangote Cement SA and 100% of Métier Mixed Concrete, a ready-mix concrete maker.
It says that Métier has experienced high numbers of late payments from customers, causing the subsidiary to raise provision for bad debts.
SepHold said on Wednesday that Métier’s customers, "mainly medium-sized building contractors, were severely impacted by the turmoil in the construction industry".
Meanwhile, estimated cement industry sales volumes in SA — including imports — for calendar year 2017 fell 0.8% from 13-million tonnes in 2016.
The Nigerian-backed building and construction materials group said headline earnings per share in the year to March would be 32%-40% lower than the R68m a year earlier.
The statement by Master Builders Association North that SA’s construction industry was in crisis came after last week’s announcement by JSE-listed construction and engineering group Basil Read that it was applying for business rescue.
"Basil Read is the second principal contractor to apply for business rescue since NMC Construction in December 2017," Mohau Mphomela, the association’s executive director said on Tuesday.
Other players in construction that had applied for debt-freezing agreements included JSE-listed Group Five and LBC Lenco Construction. The latter was geared for projects ranging from R10m to R200m.
Mphomela said the country’s construction industry had declined for five consecutive quarters. "The low investment by government in infrastructure development in the 2018-19 budget means the sector is set for further decreases," he said.
There was pressure from the "so-called construction mafia" — companies or individuals that extorted money from principal contractors involved in local infrastructure projects "in the name of empowerment", using threats of violence and project disruption. This increased the costs of doing business, Mphomela said.