Aveng Limited: Building a platform for the next century

South Africa’s need for improved infrastructure is good news for civil engineering. As the country grapples with its need to upgrade transport, water and communication networks Aveng Limited has been busy helping to deliver the changes necessary to dramatically enhance the nation’s economy.

Aveng’s success mirrors the demand for infrastructure development within the region and this year sees the 125 Anniversary for the company, as its website describes:

“Over 125 years Aveng has evolved in character, capability and reach. Its origins lie in modest construction projects but over the years, the Group has developed expertise in steel, engineering, manufacturing, mining, concessions, public infrastructure and water treatment in South Africa, the rest of Africa, Australasia and Asia. The Aveng Group continues to make its mark in mega-projects across the globe.”

With corporate headquarters located in Morningside, Gauteng, the JSE-listed group is regarded as a leader in infrastructure development through its numerous divisions covering public infrastructure, power, mining, water management, commercial and industrial, materials and rail services. In total it has interests in over 30 countries around the world with a strong focus in southern and east Africa. Globally the business employs over 30,000 people.

The group’s African business operates under the Aveng (Africa) Limited name and is a multi-discipline construction and engineering group based in South Africa. Its primary focus is on infrastructure, energy and mining across the continent.

shutterstock_104276396Aveng Manufacturing consists of 6 Business Units:

Aveng Manufacturing Automation and Control Solutions, a leader in South Africa in the field of process control instrumentation, process systems solutions, machinery health monitoring equipment and services, engineered fire and gas detection systems and solutions;

Aveng Manufacturing Infraset, which manufactures concrete products for the infrastructural market from rail to landscaping;

Aveng Manufacturing Duraset, which manufactures steel and concrete products for the mining industry and geotechnical products to the construction industry;

Aveng Manufacturing DFC, a manufacturer of valves for the water, effluent and the mineral processing industry;

Aveng Manufacturing Lennings Rail Services, which builds sophisticated range of rail machines, constructs and maintain railway lines for its rail customers;

Aveng Manufacturing Facades is a specialist division that offers the design, manufacture, supply and installation of curtain walling over cladding systems, and specialist shop front glazing solutions.

After a challenging period, Aveng has proved resurgent during the present year, as Chairman Angus Band confirmed in the company’s most recent Integrated Report:

“2014 has been a year of recovery and stabilisation with the objective of dealing with underperformance in a number of operations as well as bedding down new management in some key positions.

“While the impact of management’s interventions to reposition our South African operations is evident in the improved performance of the majority of these operations, the Group’s results were eroded by significant losses incurred by McConnell Dowell on the Gold Coast Rapid Transit rail contract in Australia, which offset a solid underlying performance by the rest of this business.

“The overall effect of these developments was a 2 per cent increase in revenue, driven by the completion of a number of major contracts in Australia. Net operating earnings increased by 20 per cent to R784 million with the benefit of a better performance in South Africa partially offset by the loss on the Gold Coast Rapid Transit contract. The progress made in Aveng Grinaker-LTA is reflected in a reduced loss and the expectation is that the new financial year will see a material continuation in its recovery. The problematic Mokolo Crocodile Pipeline contract incurred further losses during the year as a result of the heavy rainfall which flooded the area, preventing access to the site since March 2014.

“Our domestic markets remained subdued as a result of low levels of investment and activity in the mining, steel and manufacturing sectors and a disruptive labour environment. The South African Government’s infrastructure programme remains slow to come to project tender stage and projects are generally taking longer to close. The disruptive impact of the prolonged strikes in various sectors that we operate in has been very costly and has resulted in project delays. It is a matter of extreme concern that these prolonged strikes now appear to be an annual event and an alternative method of engagement has to be developed to prevent the adverse impact of this strike action on the economy in general and our sectors in particular.

“The steel sector remains depressed with both volumes and prices constrained by low demand from mining, construction and the automotive sectors. Domestic supply problems have led to a greater reliance on imports. The impact of the automotive strike last year and the recent NUMSA strike have placed further stress on the sector which has seen a number of liquidations within the smaller distribution and processing sector.

“Our mining operations have been adversely affected by the rationalisation initiatives of some customers in response to lower commodity prices. This has resulted in contracts either not being renewed or the proposed terms of renewal being uncommercial. Although new work has now been secured there was a gap between contracts terminating and new ones starting which saw revenue in our mining operations decline.

“The project pipeline within the domestic operations appears to be reasonable but the time taken to award tenders is prolonged and contract terms are increasingly onerous. Africa remains a real opportunity and management is focusing on prospects in Mozambique and other areas of material size.

“McConnell Dowell benefited from a shift in focus to transport infrastructure and other growth sectors in Australia and to other geographic markets in the region as investment slowed in resource infrastructure in Australia. Notwithstanding the completion of a number of major contracts in Australia, the order book remains strong and the opportunity pipeline attractive.

“Aveng has experienced substantial losses on a number of the larger projects in recent years but these are, by number, in the minority as we have generated acceptable returns on many other large projects. The impact of these problematic projects has resulted in material losses that have placed undue pressure on the Group’s earnings. This has necessitated a review of our risk management, project execution and claims management systems and capacity. Key leadership changes have also been implemented that will strengthen our operational and commercial leadership, particularly in Aveng Grinaker-LTA and McConnell Dowell. In addition, we have implemented measures to reduce our borrowings and improve our liquidity to ensure a stable foundation for growth.

“The setbacks referred to above should not invalidate the strong performances in other major infrastructure contracts undertaken by McConnell Dowell and Aveng Grinaker-LTA or the resilience of our South African mining and manufacturing businesses which have grown and remained profitable in spite of extremely difficult market conditions.”

It is clear that Aveng is now emerging from this difficult period and performances are now turning the corner. After 125 years of business, the Aveng name looks set to grace South Africa and beyong for many more years.