Buildmax improves on losses

2011-05-30 19:03

Johannesburg - Buildmax [JSE:BDM] whose principal business is opencast mining services, has reported a 25.4% improvement in its headline loss per share for the year ended 28 February 2011.

The headline loss per share from both discontinued and continuing operations reduced from 5.9 cents to 4.4 cents.

Despite revenue from continuing operations growing by 4.7% to R1.30bn (FY2010: R1.24bn), Ebitda decreased by 45.6% to R117m (FY2010: R215.1m) primarily as a result of costs associated with:

- The continued decline in the value of second-hand equipment and the scarcity of bank finance for new equipment;

- Ongoing use of sub-contractors and hired equipment at punitive rates; - The Mining Services business unit having to extend the life of its yellow metal fleet, resulting in an increased investment in maintenance and related resources to improve sustainable plant availability and productivity;

- Excessive rainfall during the last four months of the financial year; and

- The continued erosion of margins in the construction industry.

The loss before taxation improved from R810.9m to R377.5m which includes non-cash impairment losses of R274.4m in the current year.

Shareholders' funds decreased to R550.1m (FY2010: R629.1m). Net asset value per share, (based on the number of shares in issue at the end of the current financial year, subsequent to the rights offer) reduced from 18.3 cents to 16.2 cents and net tangible asset value per share.

Looking ahead, the group said coal remained one of the cheapest sources of energy in the world. Its abundant reserves compared to other fossil fuels meant that it was likely to remain the primary source of energy for the foreseeable future.

"Whilst Eskom has curtailed its projected demand for coal over the medium-term and has announced its intention to introduce alternative energy sources, the continued roll-out of coal fired power stations coupled with international demand for thermal and coking coal, particularly from China and India, should ensure continued growth in this sector for the foreseeable future.

"Additional export capacity continues to come on stream at Richards Bay, Durban and Maputo. Exports from Richards Bay for the financial year under review were marginally higher than the sales for the comparative period. Further, Transnet has announced that it intends to increase the size of its rolling stock fleet and improve its rail network which should alleviate some bottlenecks currently experienced by coal exporters.

"The Buildmax Group has meaningful contractual relationships with the leading mining Groups in the country, which it is ambitious to grow for mutual benefit.

"Mining Services is well positioned to participate in additional coal mining supply chain activities that are less capital intensive. Management is currently formulating its strategy in this regard. The directors are optimistic that this market will provide profitable opportunities for the Mining Services business unit in the future," Buildmax said.

Turning to its Construction Materials division, it said the outlook for the construction industry was reliant on spending by government and the private sector. The lack of funding continued to hamper public sector projects while high levels of debt, excess stock and a lack of bank funding continued to impact negatively on the private sector.

"Predicting a recovery in the construction market is extremely difficult and the market is not expected to improve during the 2012 financial year. However the businesses in the Construction Materials unit are well positioned to benefit from improved trading conditions as and when they occur," it added.