AVENG had to absorb R120 million in costs related to labour disruptions at the Medupi power plant construction site and at various other construction and mining projects in the second quarter of its interim period, pushing its construction business, Grinaker-LTA, into a loss.
These costs reduced the profit reported by the listed construction and engineering group for the six months to December by 23 percent to R397m.
Aveng chief executive Roger Jardine said on Friday that the group would look to recover the costs of work stoppages outside of its control and emphasised Grinaker-LTA made a profit if the cost of the labour disruptions was added back.
Jardine said some of the labour disruptions were not caused by its workers but by them “getting caught up in the general environment”. He warned if the labour situation did not stabilise, the impact could continue into the second half of its financial year.
Murray & Roberts last month reported that strike action had cost the company an estimated R200m in six months.
While Aveng acknowledged the right of employees to strike as part of the collective bargaining process, or when their rights were violated, the levels of violence and disregard for established dispute resolution processes was self-defeating and could not be justified, Jardine added.
“This is even more concerning when we consider that this is happening at a time when South Africa’s economy has stagnated for a number of years and fewer new job opportunities are being created. Unlawful or violent industrial action can only worsen the situation.
“The time has come for all social partners to put the country first and stabilise our labour relations environment so we can create a climate conducive to investment, economic growth and employment creation,” he said.
Jardine said Grinaker-LTA was also negatively affected by the slower realisation of the benefits from a restructuring and the cost of retaining skills.
He confirmed the holding costs for some key skills were related to its preparation for the government’s multibillion-rand infrastructure expenditure programme.
A strong performance by Aveng’s Australian business boosted the group’s financial performance in the six-month reporting period, with headline earnings a share increasing 48 percent to R1.045 from the previous corresponding period.
Revenue increased by 30 percent to R24.99 billion, while operating profit improved by 56 percent to R518m.
Its two-year order book shrank 48 percent to R39.7bn but Jardine stressed this was off a high base established over the past two years. He said the group still had a strong order book, with good growth prospects outside South Africa and in south-east Asia, and had also won some big contracts since the end of its interim period.
Commenting on Aveng’s future prospects, Jardine said the group had a well-balanced portfolio, geographical diversity and multi-disciplinary capabilities across the infrastructure value chain and would continue to focus on project delivery and to reduce the financial impact of challenging contracts to improve its operational performance.
Aveng shares declined 3 percent to close at R35.89 on Friday.