Bheki Mpofu
18 November 2008
Johannesburg — ALTX-listed electrical and instrumentation contractor B&W's net profit for its maiden full year to August has jumped 133%, beating its prelisting forecasts.
The rise was driven largely by its cross-border operations and mining sector projects.
CEO Brian Harley said yesterday the company expected its earnings to continue to grow due to its expanding African operations as well as growth in the coal-mining sector as it battles to meet Eskom's soaring demand.
He said the group expected to see a number of coal projects fast-tracked given Eskom's need for greater coal supply.
Headline earnings for the year grew 133% to R58m, which was 75% higher than the company's forecast when it listed last year, and headline earnings per share jumped 104% to 29,02c from 14,26c. Turnover was R450,3m, or 53% more than had been projected.
The company said strict cost controls had seen its profit margin of 12,8% outstrip the average of 6,5% for JSE main board competitors in the heavy contracting sector.
Healthy cash flows left the group with R111m cash in hand at year-end, more than tripling the R34m at August last year.
B&W intensified its strategy of focusing on cross-border business with the establishment of subsidiary companies in Madagascar and Mozambique following the award of major contracts in those countries.
Harley said up to 75% of the group's revenue for the financial year was expected to be generated from the rest of the continent.
African contracts worth R207m made up 43% of the total orders B&W secured for the year under review.
"The installation at a nickel mine in Madagascar for a Canadian company, grossing R135m for the group, is progressing well and we are currently negotiating our biggest single order to date in Mozambique."
He said the local mining industry remained a core revenue generator for the group during the year, with the local power crisis having resulted in numerous coal mine projects as Eskom's demand for coal soared to increase capacity. B&W secured two such projects during the year.
"Our order book was boosted by two large contracts - one at Anglo Platinum's Amandelbult Platinum operation and the second at Anglo Coal's Phola Coal processing plant -- with values of R36m and R25m apiece," he said.
However, he said the group expected a long-term slowdown in the mining sector as commodity prices declined.
"In addition to our traditional markets, B&W is actively targeting increased penetration of high-growth energy industries, including oil and gas, where considerable construction activity is anticipated from 2010."
Chairman John Barrow said B&W was in a strong position to weather tough times expected as a result of a challenging economy. "The group already has R428m in hand for the year to August 2009, which is 80% of our total projected order book.
"We are confident current local and African markets offer sufficient scope for the group to grow organically at a rate of 20% year on year in the short term."
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