File photo: Reuters

Johannesburg - The spillover effect of labour unrest on the platinum mines in North West contributed towards a poor financial performance by listed construction company Esor in the year to February.

Three problem contracts in the group’s civils division, including the Bakwena N4 toll road contract near Marikana, resulted in a R134 million operating loss for this division.

Wessel van Zyl, Esor’s financial director, said there was a R94m loss on the Bakwena N4 project in the year, with R62m attributable to the division never achieving the anticipated and historical productivity on the contract because of the impact of the strikes at the Marikana mine.

He said Esor had a peak of 300 people working on this project but 600 during the life of the project, which meant that the company had changed the staff twice because of the environment in which the business was working.

A design error on a bridge was picked up by the client in February, which meant the bridge had to be demolished, further delaying completion.

The contract was awarded in May 2011 and initially had a 30-month duration but is now only expected to be completed in August.

The other problem contracts were the Hwelereng road contract for the Roads Agency of Limpopo and the main civils, boxwall and highwall project at Anglo American’s Kriel thermal coal mine. It made losses of R45m on the Anglo contract and R27m on the Hwelereng project, both of which have been completed.

The civils division also has claims worth R250m outstanding on contracts for the Kusile power station project, which the company believes will be settled by September.

The loss-making contracts were primarily responsible for Esor reporting a headline loss a share of 11.3c in the year to February compared with headline earnings a share of 20.5c a year earlier. It made an operating loss of R281.8m compared with an operating profit of R749m previously.

Bernie Krone, Esor’s chief executive, said the group had addressed major loss-making contracts in the civils division, devised a comprehensive turnaround strategy and right-sized and restructured to align with future work.

He said employee numbers dropped to 1 900 in February.

Revenue rose by 3.6 percent year on year to R1.59 billion, driven largely by the 79 percent rise in revenue at the pipeline division. The order book grew by almost 19 percent to R2.6bn.

Krone said it had been a turbulent year for the group and its return to a satisfactory financial position was the result of a strategic overhaul and consolidation.

The company’s shares leapt 15.63 percent to close at 37c on the JSE yesterday.