Diversifying a success for Buildmax

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Johannesburg - Listed opencast mining contractor and building materials supplier Buildmax aims to continue to grow organically and through acquisitions.

Terry Bantock, the group’s chief executive, said yesterday that the group was particularly pleased with its recent successes in the Republic of Congo and Botswana, where it had achieved geographic and commodity diversification.

Bantock said the group actively pursued opportunities in the platinum and gold industry with the objective of winning a substantial contract with acceptable margins, taking into account industry-specific risks.

But the civils business had not performed in line with expectations in the year to February. Bantock attributed this largely to the impact of the depressed construction industry, in which margins remained subdued and under pressure.

However, the performance of the quarry business had improved significantly. This was despite difficult trading conditions, which were characterised by pressure on pricing and erratic demand.

Buildmax yesterday reported a 15 percent increase in headline earnings a share to 32.9c in the year to February from 28.6c the previous year.

Revenue rose by 7 percent to R1.27 billion from R1.18bn.

Operating profit improved by 18 percent to R117.7 million from R99.4m. Cash flow from operations increased 8 percent to R274.7m from R253.2m.

The group did not declare a dividend.

Bantock said the group was fortunate to have meaningful, value-adding and service-orientated contractual relationships with most of the leading mining groups in the country.

The propensity to outsource remained buoyant and Buildmax’s aim was to continue to grow customer-focused strategic alliances.

He added that to unlock strategy, Buildmax was highly reliant on its ability to maintain volumes in the coal sector. But this was under pressure, largely due to low commodity prices exacerbated by weak global demand.

However, Bantock was confident this would change in the next 12 to 18 months and Buildmax would be well positioned to take advantage of outsourcing opportunities.

The group believed the propensity to outsource would increase because of a number of factors, including shorter-term project horizons, mining houses wanting to reduce risk, flexibility in the supply of equipment, onerous regulatory requirements and labour relations.

He said demand in the construction and civils sector of the economy was slowly gaining momentum but margins would remain under pressure.

However, the group was optimistic that these operations would steadily improve, buoyed by acquisition and improved pricing prospects in its quarries business.

Bantock said labour uncertainty in the industry and the expectation gap between the increasing demands of unions and the ability by companies to meet these requests was one of the most significant risks.

He said good communication was imperative to mitigate this risk and the group was pleased to have signed a five-year wage agreement with its recognised union.

Buildmax shares rose 5.66 percent to close at R2.80 on the JSE yesterday.


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