M&R’s new oil and gas focus: Wheatstone project, Onslow, Western Australia. Picture: MURRAY & ROBERTS
M&R’s new oil and gas focus: Wheatstone project, Onslow, Western Australia. Picture: MURRAY & ROBERTS

Murray & Roberts’ (M&R’s) underground mining operations, which compete with Aton’s Redpath business, made the biggest contribution to the engineering and construction group’s full-year profits to end-June 2019.

Its strong performance cushioned the group from the sharp drop in contribution from the other two divisions — oil and gas as well as power and water.

The M&R share price closed 2.71% firmer at R11.35 after the release of results, which revealed diluted headline earnings were down 10% to 101c a share and the dividend up 10% to 55c a share.

M&R’s underground mining operations dominated the 2019 results, accounting for just more than half of the group’s R20.2bn revenue and all of its operating profit.

The division’s operating profit almost doubled to R814m, helping to cushion the bottom-line effect of the R98m operating loss reported by the oil and gas division, where there were not enough projects to cover overhead costs.

The power and water division reported a loss of R32m as a result of limited new projects and a loss incurred on a Sasol project, which is being disputed.

“The platform is targeting maintenance contracts from Eskom for its ageing fleet of power stations,” said Ed Jardim, group investor and media executive. “Furthermore, investment in renewable energy and in new fuel storage terminals should also provide complementary market opportunities.”

Jardim said the group is in a strong cash position and debt is within its targeted range. “The group’s financial position, even after a number of years of subdued profits, is robust and sufficient to fund its organic and acquisitive growth plans.”

Two weeks ago, M&R announced that its subsidiary Clough USA had won a $620m (R9.5bn) petrochemical engineering, procurement and construction (EPC) contract in the US.

The project is Clough USA’s first major contract and would entrench the company in the North American market, Murray & Roberts said.

The wholly-owned subsidiary was established earlier in 2019 after M&R’s acquisition of Saulsbury Industries’ Gulf Coast downstream EPC business.

M&R is in the middle of a takeover bid by German group Aton, which already owns 44% in M&R.

In July, the Competition Commission recommended that the proposed acquisition of M&R by Aton, which was launched four years ago, should be prohibited. The commission found that M&R and Aton were close competitors in the provision of underground mining services.

An independent committee of the M&R board has recommended that shareholders reject the offer.