Profits drop as spending dries up

JSE-LISTED construction company Stefanutti Stocks Holdings reported yesterday a 43 percent decrease in its operating profit to R100 million for the six months ended August as private and public infrastructure spending in southern Africa declined.

The construction firm, which operates in South Africa, sub-Saharan Africa and the Middle East, said net profit fell 30 percent to R85m from the equivalent prior period.

Chief executive Willie Meyburgh said yesterday that a combination of currency fluctuations in the countries the group operated in and the tough home market had had an adverse impact on its financial performance.

“The South African construction market remains challenging with escalating levels of competition for the limited available work in the market,” Meyburgh said.

Agreement The company along with six other construction firms last month entered into a settlement agreement with the government on the 2010 collusion and bid-rigging of construction tenders.

Stefanutti’s obligations amount to R180m payable in annual contributions of R15m for the next 12 years. The city of Cape Town, however, poured cold water on the settlement, indicating it would head to the courts to retrieve the R420m it believed it lost due to the collusion.

The company believed it would successfully fend off the legal challenge. “All matters previously noted, settled and/ or withdrawn other than the civil claim received from the city of Cape Town, no provision has been made as the group is confident to successfully defend the matter,” it said.

The group’s headline earnings per share rose 8.8 percent to 52.73 cents. The company’s revenue for the period under review was R4.4 billion, while it had cash on hand of R1bn and its capital expenditure amounted to R78m.

Stefanutti’s had an order book of R14bn. It employs more than 12 000 employees across its five business units.

The building business unit’s contract revenue fell to R1.8bn from R2.1bn for the period and the roads, pipeline and mining division’s revenue declined by R497m as a result of a delay in the awarding of contracts, while its operating profit declined to R81m from R100m.