M&R may sell building, infrastructure units

geographic reach of the oil and gas business, which operated primarily in Australasia, chief executive Henry Laas said.

“We want to be a lot more active in Indonesia and a lot more active in the US and Canada. Those businesses need to grow,” he said.

The company was doing due diligence on a potential target in the US that would add the ability to construct oil and gas projects in the world’s biggest economy, Laas said.

While the value of that transaction wuld not be “too material”, the company would probably be looking for a larger, international deal in a few years’ time, he said.

First it needs to resolve outstanding claims related to its work on the Dubai International airport and the Gautrain rail project.

Gain of Murray & Roberts’ share price so far this year

It was hoping to recover at least a combined R1.5 billion from the two cases, the chief executive said.

The building and infrastructure businesses contribute little to earnings and will probably be sold to a South African black-owned company,.

An ownership change would increase the units’ opportunities as the government prioritised the award of contracts to entities controlled by people discriminated against during apartheid, he said.

More than 90 percent of the company’s profit came from the oil and gas and underground-mining businesses, the bulk of which was earned outside South Africa, Laas said.

As the company expands internationally, investors are asking whether it makes sense to add a second listing on a stock exchange alongside Johannesburg. “I think it’s something that will probably happen,” Laas said.

“If we find a suitable acquisition target, if it is a listed entity maybe that is a catalyst” for achieving another listing.

M&R shares have gained 56 percent this year in Johannesburg, giving it a market value of R5.5bn.

The stock declined in both of the previous two years, falling a combined 70 percent.

Attributable earnings decreased by 15 percent to R753m in the year to June.

While oil and gas spending is constrained and mining houses are prioritising investment at existing projects rather than starting new ones, M&R is confident that both businesses will eventually pick up.

“We believe that the longterm demand for energy must increase, energy consumption must go up,” Laas said. “Commodities are cyclical and the market will come back.”

M&R shares fell 0.58 percent to close at R12.40 on the JSE yesterday. – Bloomberg.