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Protech turns to mining sector

Johannesburg - Civil engineering firm Protech Khuthele has said it will rely heavily on revenue from mining projects, because the public works programme was heavily over-traded by its peer group.

"It was everyone's Noah's Ark," said Protech CEO Gerald Chapman about the government-backed public works programme. It has generated billions of rands in project work for South Africa's civil engineering companies, including Basil Read and Murray & Roberts.

Chapman was commenting in the wake of Protech's interim results announcement on Monday, in which it posted a 9% decline in net profit of R48.6m while share earnings were 8% lower. The figures could have been worse, however, as the top line was nearly a quarter lower.

"Everyone ran there [to public works]," said Chapman. "This worried us because of the tighter competition. We were concerned about the slow rollout of contracts as the new government had to settle in following elections," he said.

Protech now believes civils work from mines, particularly in the coal and platinum sectors, provides the better alternative.

Coal demand is being driven domestically and internationally owing to the twin effects of South Africa's power supply deficit and China's gross domestic product growth, expected to test double figures in 2010.

"We've always had a coal and platinum presence and now with what's happening in China and India [economic growth], there's more demand," said Chapman.

Protech secured three new projects including the DMO pipeline with BHP Billiton, the Dorstfontein access road (Total Coal SA), and works on the new Kiepersol mine (Jindal Mining SA).

"Of our [total] work in progress, which had a total contract value of R982m, some work has been completed," said Chapman.

The group has already secured 65% of its 2009 financial-year revenue of R706.7m, with current secured work of R456m in progress and about R300m of imminent contract awards.

Chapman said that over the next six months government spend should pick up, which will benefit Protech as it was still in the running for a number of state-funded projects.

- Fin24.com

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