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Protech shuns sluggish state sector

May 31 2010 15:40 Leani Wessels

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Johannesburg - Protech Khuthele is hoping to benefit from a recovery in the mining industry, as the civil engineering firm turns away from the public sector because of problems with corruption and slow delivery.

The group said it will continue its strategy of focusing on the coal mining sector and applying for tenders in other African countries, as the local construction industry suffers from the slow roll-out of government's promised R845bn infrastructure spend.

"[Bribery] is a scary reality and one of the reasons for the slow roll-out [of government infrastructure projects]," said Protech CEO Gerald Chapman.

According to the group, in the 2010 financial year 90% of its R1.43bn pipeline consists of private mining contracts.

This was announced at Protech's annual results presentation in Johannesburg on Monday. The group's earnings per share dropped by 18% to 20.9 cents per share. Revenue increased by 7% to R748.8m.

The construction group has exposure to bulk earthworks, roads and civil works and mining infrastructure.

Coal mining should benefit from increased domestic and global demand - Eskom's immediate needs, and China's planned 500 coal-reliant power stations that will be built over the next 10 years, said Chapman.

Its construction business is eyeing projects in countries like Zambia, Tanzania and Angola. The group says exposure to other African countries is crucial to mitigate its rainfall risk.

The company's poor results are due mainly to disruption caused by the exceptionally high rainfall the country experienced between December 2009 and February 2010.

"[Protech's] results are in line with the industry," said Imara SP Reid analyst Stephen Meintjes. "They have enough work for the year and their order book is very strong."

According to Meintjes, there is space for Protech in the mining sector and the group won't go head-to-head with the major construction companies.

The firm said it can change its strategy at a moment's notice, and the mining industry will sustain earnings until private and public spend improves.

"[Finance Minister] Pravin Gordhan has been very careful; come the end of the year he will have a lot more money in the kitty to spend," said Meintjes.

"If and when the public spend occurs, it will reverse the state of the industry," said Chapman.

 - Fin24.com
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