Johannesburg — CONSTRUCTION group Aveng said yesterday its headline earnings per share for the full year to June will drop between 20% and 25%, citing a fall in the price and demand of steel.

Earnings had also been affected by the payment of a special dividend, return of cash to shareholders and a R4,6bn share buyback programme.

The group had so far also cut 450 jobs, or 1,4% of its workforce, due to tough economic times and project cancellations amounting to R4,2bn, it said.

The decline in earnings come after CEO Roger Jardine warned in March that the group would not match growth achieved for the full year last year as trading conditions continued to deteriorate in the second half because of the global economic crisis.

"We are not expecting to match performance in the six months to June last year mainly because our manufacturing and processing division is feeling the squeeze of price reduction in steel. Steel prices have come down significantly in recent months, compared to where they were this time last year," Jardine said in March.

For the year to June last year, the group reported an 85% increase in diluted headline earnings per share.

The global economic downturn and its effect on steel prices and volumes in most sectors saw the group's earnings from the manufacturing and processing division come under "significant" pressure in the second half.

"Steel volumes in Trident Steel are down 26% on 2008, with demand in the automotive sector falling by 35%. This, together with the decline in steel prices of between 30% and 35% has resulted in the profitability levels of Trident being substantially below that achieved in 2008," Aveng said.

The group said its Steeledale and Infraset business units had also come under earnings pressure due to the decline in steel prices, as well as due to decreasing demand for consumer related paving and landscape products within Infraset.

The group said it had not had further project cancellations since February, with its two-year order book now standing at R32bn -- which represented 9,6% growth since December.

"The group's strong balance sheet and conservative approach to conducting business ensures that it is well positioned to weather current adverse market conditions."