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South Africa: Engineering Firm Pumps Up Business
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Business Day (Johannesburg)
ANALYSIS
5 May 2008
Posted to the web 5 May 2008
Bheki Mpofu
Johannesburg
Export opportunities can be found in adverse circumstances, Bheki Mpofu discovered.
MANY companies consider Iraq a no-go area, but a Johannesburg enterprise has seen and is seizing the many opportunities the violence-ridden and politically unstable country presents.
Industrial engineering company PSV Holdings is about to complete orders worth R30m to supply giant pumps to a water project in Iraq. And the AltX-listed group expects more orders for its pumps and other products.
CEO Abilo da Silva says three pumps have been shipped and a fourth is to be shipped this month. Orders for two more pumps valued at about R14m are expected soon.
"Iraq has become an important market for us because of the reconstruction following years of political instability," he says. "Before the war, we were supplying equipment to the petrol market there, and when a request for water reticulation pumps came , we jumped at the opportunity. The US federal government placed an order for four pumps for direct shipment to Baghdad."
Alan Sternsdorf, the group's engineering director, says the vertical turbine pumps -- said to be the biggest ever produced in SA -- are manufactured at the group's APE Pumps plant in Germiston and are shipped to a water supply project about 100km southwest of Baghdad.
The US-funded multi-billion dollar project involves the rehabilitation of canals and pump houses to deliver water to nearby centres. When fitted with its 1300 KW, 400rpm 14-hole electric motor, the pump is almost 20m long , weighs 36 tons, and can pump 3800 litres of water a second, Sternsdorf says.
The group specialises in liquid pumps, valves, engineering linings, industrial supplies and fuel pumps and dispensers, and has a full order book. It supplies to SA and other parts of Africa, and as far afield as Australia and the Middle East. Even Zimbabwe is on the list of clients, with petrol dispensers worth R5m sent last year.
Locally, main clients include the water utilities, Eskom, Engen, mining companies and steel mills. "We have a strong export and growing local base, which keeps our order book full. Now that we have black economic empowerment partners, our local business has experienced even stronger growth," Da Silva says.
The group has been on the acquisition trail since listing in 2006, which has put it in a position to bid for even larger contracts. The weakening of the rand in recent months has also boosted the growth in earnings of the export business.
Late last year, the group acquired three companies -- Dasher, Engineered Linings and APE Pumps -- for R43,6m. Da Silva says the group now has eight subsidiary companies and aims to grow organically. The acquisitions have seen PSV's annual turnover rise to about R250m.
Da Silva says since the listing two years ago, the company has experienced the fastest growth in its 20-year existence. Staff has grown from 30 people to almost 300.
"We are going to keep looking for acquisitions to strengthen our business, locally and abroad, which will allow us to compete for even larger contracts."
Da Silva says major challenges include the loss of skilled personnel, who are leaving the country in large numbers because of issues such as violent crime and political uncertainty.
Other major challenges are the power crisis and rising fuel and steel prices, which are putting strain on the bottom line. "Steel and fuel price increases are higher and more frequent than before, putting pressure on our business."
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However, Da Silva is unfazed by these problems and says the company is turning some into opportunities. "Despite the challenges, we are gearing up to take advantage of the country's infrastructure spending. We are in a good space because our business is diverse." The company is already preparing to benefit from the multi-billion rand Eskom tenders to build new nuclear and coal power stations, as well as water projects expected with the revamp of SA's reticulation infrastructure.
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