Bheki Mpofu
22 October 2009
Johannesburg — CONSTRUCTION and engineering group Murray & Roberts said yesterday the recovery in key commodities had brought some stability to its international operations, but the continuing strength of the rand could hit its earnings for the year.
The slow recovery of the local economy as well as project-related factors at its southern African unit were also expected to affect performance negatively this year, the group said in a business update to investors.
Murray & Roberts' comments on the rand come as several analysts have cited the currency's strength as a major threat to recovery of the local economy, despite signs that the global economy was in recovery mode.
The group said stability had been brought to its international operations, especially in the Middle East, where volatile economic conditions had contributed to about 40% of the group's order book being wiped out in the past financial year.
It said, however, that continuing strength of the South African currency would have a negative effect on the translation of these earnings.
In August CEO Brian Bruce underlined the importance of the group's international portfolio when he said the company planned to expand its operations in the Middle East, Asia and South America despite experiencing project cancellations and postponements due to the global economic downturn.
The group said yesterday: "General business conditions in the group's South African markets have been slow through the first quarter of the new financial year, and the local economy is expected to take longer than previously forecast to emerge from the effects of recession."
There was little private sector involvement in the South African market, which had a negative view on the short- to medium-term outlook for domestic mining and industrial and commercial project opportunities , it said.
"Public infrastructure projects have continued to support activity in the local market, with numerous programmes under way to either meet 2010 Soccer World Cup demand or to overcome service capacity backlogs."
The group's project order book at the end of last month remained steady at about R40bn, made possible by a project opportunity pipeline that had increased to R80bn, it said.
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