BUILDING: Tale Of Two Ventures
Recent Western Cape Business News
It's hard to believe that two Cape-based companies plying their trade in the wider building and construction sector could have experienced such vastly differing fortunes in the year to end February 2009.
But the record shows that glass, aluminium and steel cladding specialist Mazor saw their large-scale and high margin projects boosting revenue 67% to R296 million with operating profit shifting up 16% to R75 million.
By contrast aggregates and ready mix concrete supplier Afrimat saw net profits crumble more than 30% to R90 million from a 13% increase in revenue to R687 million.
Afrimat, it seems, was smacked by a poor performance from its aggregates division, which has a sprawling presence in the Western Cape.
Afrimat CEO Andries van Heerden said the Aggregates division was unable to overcome the Western Cape’s collapsed residential sector and low spend on infrastructure. He said municipalities also delayed projects.
Van Heerden said that although the aggregate division’s performance improved in the third quarter of the financial year, there was a deterioration in the fourth quarter due to the traditional month-long ‘builder’s holiday’ and further delays in the off-take of large-scale infrastructure projects to April 2009.
Van Heerden put on a brave face, though, noting that “the award of a number of large-scale projects in Gauteng, Limpopo and Mpumalanga and new processing plants there should translate to growth in this division going forward.”
The other bit of good news for Afrimat was that the commissioning of the new plant, the Denver quarry, which supplies the Port Elizabeth metropole, performed exceptionally well throughout the year to end February 2009.
Despite the performance slump in key Western Cape markets, Van Heerden expected business activities for the year to February 2010 to show a marked uptick.
“Government’s continued commitment to infrastructure projects is set to stimulate greater demand for Afrimat’s products, and the group’s geographic footprint ensures Afrimat is well placed to deliver.”
Mazor’s performance is almost unbelievable considering the stagnant conditions in the building sector, but CEO Ronnie Mazor said the group’s strategy of targeting major, highly profitable projects - such as high-rise buildings, hotels and similar large-scale works – paid off.
He pointed out that Mazor also successfully diversified into the high growth glass sector through two key acquisitions - making significant inroads especially in the Cape.
Mazor said the group remained ideally positioned in two construction markets – namely steel and glass - that were reaping the benefits of increasing environmental consciousness.
“The insistent move to ‘green’ construction is to the group’s advantage as more resources-efficient buildings demand greater use of steel and glass.”
He added that a growing design trend of impressive building facades is further boosting demand for glass and glass cladding.
Mazor Steel and Mazor Aluminium - the group’s two founding divisions - both achieved year-on-year growth in revenue of more than 60% and profit growth of around 25%. Mazor said a focus on more efficient deployment of available capacity spurred growth in both divisions.
The glass division is showing much promise as well. Mazor said the new division achieved first-time revenue of R41 million.
To build the division Mazor acquired Independent Glass in March 2008 and the larger Compass Glass in July 2008 for a maximum of R51.4 million in total.
Mazor said the group seized significant market share in the Cape Peninsula by optimising the manufacture of safety glass and double glazed units.
He disclosed that the group’s order book in hand for the first half of the 2010 financial year remained healthy and was “relatively untroubled by macro-economic woes.”
Mazor was, however, more cautious of the second half of the financial year - citing “cloudy prospects on account of global economic uncertainty.”
He stressed that the Glass division would become a future growth driver for the group – predicting that a substantial proportion of top and bottom line growth would come from this division over the next three years. He also reiterated that Mazor would look to untapped distribution markets in new sectors to achieve growth targets. “We will continue looking at other markets outside our traditional field of fabricating building exteriors.”
This exercise in diversifying distribution could, Mazor confirmed, include furniture and cars.
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