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Send  Share  RSS  Twitter  16 Feb 2010

VENTURES: Lonrho 'Kwikens' Building Pace

 



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PAN African conglomerate Lonrho Plc has bumped up its stake in Cape-based building solutions company, Kwikbuild, to 70%.

According to an announcement published near the end of 2009, Lonrho paid around R4 million to acquire another 8% of Kwikbuild. That infers a value of around R50 million for Kwikbuild, which specialises in designing, manufacturing and supplying prefabricated buildings.

The company – which recently opened a panel manufacturing plant in PE, has a product range that includes basic houses, workers camps, offices, classrooms and clinics. As the name suggests, these structures can be erected fairly quickly and cost effectively.

Lonrho initially acquired a 52% in Kwikbuild in 2007 for around R15 million but has since pushed its stake to 62% and now 70%. The 2007 deal valued Kwikbuild at around R30 million, which – judging by the sum paid to acquire the latest 8% stake - suggests the business is growing.

Lonrho executive chairman David Lenigas says the acquisition of a bigger stake in Kwikbuild forms part of a strategy to increase Lonrho’s equity positions in both its building and agricultural divisions.

Of course, cynics may wonder whether Lonrho is not making the same mistake it made with shipping group SA Independent Liner Services (SAILS).

Readers may remember that Lonrho steadily bulked up its stake in a supposedly promising SAILS, before having to abandon ship (so to speak) when the company was forced into liquidation.

Building supplies companies largely have been struggling since late 2008 with construction and infrastructure-aligned activity tailing off markedly.

But Lenigas hints that Kwikbuild has a fairly robust order book.

In the quarter ending September 2009 Lenigas reported SA’s general elections had led to a decrease in the number of tenders that were issued as government contracts.

But in the December quarter Lenigas noted a four fold increase in the number of government projects released for tender compared to the previous two quarters.

He said Kwikbuild had reacted to the opportunity created by the upsurge in the tender process and has tendered for significant potential volumes.

Lenigas points out that historically Kwikbuild won about 40% of tender applications submitted.

He says during quarter four Kwikbuild secured new orders to the value of R18 million.


 
 
 
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