Murray & Roberts faces additional pain from M1 bridge collapse

08 November 2015 - 02:00 By ASHA SPECKMAN
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The aftermath of the collapse of the temporary bridge next to Grayston Drive on the M1. The AfriSam cement truck said to have crashed into the bridge is circled. AfriSam says the truck was stationary at the time of the collapse.
The aftermath of the collapse of the temporary bridge next to Grayston Drive on the M1. The AfriSam cement truck said to have crashed into the bridge is circled. AfriSam says the truck was stationary at the time of the collapse.
Image: GALLO IMAGES/BEELD

Murray & Roberts, already facing possible claims for death and injury after last month's pedestrian bridge collapse in Johannesburg, is expecting to be hit with penalties of R5-million to R6-million due to delays in the project.

Henry Laas, Murray & Roberts CEO, gave the figure after the construction company's AGM on Thursday.

He said 18 of the 19 people injured when a temporary structure over the M1 collapsed during rush hour had been discharged from hospital. Two people were killed in the collapse.

The Department of Labour will take another six months to complete its investigation into the accident, which will focus on the roles of Murray & Roberts and its clients, the City of Johannesburg and the Johannesburg Development Agency. Other aspects include the role of the supplier of the materials used in the structure and the design.

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Laas told the AGM the company was well-positioned for an expected surge in demand for natural resources, although the outlook for the building and construction sector was grim.

"A commodity cycle upturn is expected in the medium term with a large pipeline of underground mining projects," he said. But there was hardly any activity in opencast mining, he added.

Murray & Roberts had orders worth R17.1-billion by September and near orders of R4.8-billion in mining. The company provides infrastructure replacement services on operating mines, but Laas said prolonged low commodity prices and weaker demand for commodities had limited opportunities in this sector in South Africa and on the Zambian Copper Belt.

He said the Australian gold sector and the Canadian market held potential for growth off a low base.

In the buildings market, Murray & Roberts is participating in two residential developments in Gauteng with a combined value of R1.5-billion, as well as developments elsewhere in South Africa with a financial services company. The company's infrastructure and building order book was steady at R7-billion in September compared to R7.1-billion in June.

But Laas said the company would have to look outside South Africa for new opportunities in the building sector because this sector was slowing down in South Africa.

In oil and gas, the company was targeting the Australian brownfields market, which was expected to grow up to $5-billion (about R70-billion) annually over the medium to long term as new liquefied natural gas facilities began to operate.

LNG projects in the US, Africa and Papua New Guinea were other opportunities in the long term. The oil and gas order book was worth R6-billion in September.

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The company has also been selected as a preferred contractor on the George biomass energy project in the Western Cape and on the Morupule A power station repair and maintenance project in Botswana. These projects are valued at R300-million each.

On Thursday Murray & Roberts shares fell 8% to R9.90 before closing at R10.04 following the trading update. On Friday the shares lost another 2.29% to close at R9.81.

Competitors are also under pressure. Basil Read, which returned to profitability in the six months to June, also lost 8% to close at R3.85 on Thursday, but ended the week at R4. The company is using proceeds from asset sales to reduce debt.

Sasha Naryshkine, a director at the asset management company Vestact, said the outlook for construction in South Africa was muted. "Margins are razor thin, work is tight." But he added: "Don't make the mistake, however, of thinking that all the companies are the same. Many do completely different work in different geographies."

The JSE construction index had declined by nearly 40% for the year to date on Friday. The All Share index, in comparison, had gained 7% over the same period.

speckmana@sundaytimes.co.za

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