Stefanutti Stocks CEO Willie Meyburgh. Picture: FINANCIAL MAIL
Stefanutti Stocks CEO Willie Meyburgh. Picture: FINANCIAL MAIL

Listed construction firm Stefanutti Stocks on Thursday flagged the possibility of further restructuring and retrenchments if the subdued conditions in the local construction industry persisted.

The possible job losses at the company once again shine the spotlight on the difficulties that some construction companies face amid dwindling work from SA’s private and public sectors.

Since February 2018 , Stefanutti’s order book has fallen by 9%. “That is the lowest the order book has been in two years. What do you do if the order book is down? You do not have work for all the people. You need to right-size. Unfortunately, the people are always the casualty of the fact that there is not enough work,” says CEO Willie Meyburgh.

In response to limited investments, Stefanutti has in the past scaled down operations. “We need to scale down in terms of management and total workforce — from the labourer up to senior management. It is not nice but because of the state of the economy, we have [reduced the size] of the building and structures businesses. Recently, we [reduced the size] of our electrification and instrumentation business,” he said.

The reduction of the business units entailed job losses of about 1,500 employees out of a workforce of 12,500 in the past 18 months.   “It is sad that people are losing their jobs because there is not sufficient work to sustain the construction sector,” Meyburgh said.

He said the company was not planning major restructuring in the next eight to 12 months. “But if the order book continues to decline, we have to revisit that.” 

According to Meyburgh late payment from some of the company’s clients exacerbated the difficult conditions in the local industry. He cited the governments of Nigeria and Zambia as well as developers working for SA’s department of human settlements among the slow payers. Uncollected debt amounted to R300m, he said.

“The late payments are really affecting our working capital. At the moment we are funding a lot of our clients’ projects because they are not paying us in time.”

With the South African market depressed, the company has increased the amount of work from outside the country. For the last five years, more than 30% of the company’s turnover came from outside SA. At the end of February 2018, more than 50% of the company’s profit came from outside the country. In the six months ended  August , 56% of the firm’s operating profit was from non-SA operations . 

In the six months, the company’s contract revenue fell to R5.1bn from R5.2bn , while operating profit increased from R110m to R125m. Earnings per share increased by 41% to 61.76c and headline earnings per share were up 46% to 60.30c.

The company reduced capital expenditure from R500m to R34m. Just like in 2017, Stefanutti did not declare a dividend.  The company last declared a dividend in 2011.

“We are satisfied with the half-year performance in the current market conditions, especially with the operating profit which went up,”  Meyburgh said.

 The company benefited from improved performance in the United Arab Emirates. “They produced a good performance. I do not think it will be repeated in the second half,” Meyburgh said.