South Africa's Aveng says profit lower, sees risk in labour unrest

Reuters
Residents walk past a deserted building site during a strike by construction workers in Cape Town
Residents walk past a deserted building site during a strike by construction workers in Cape Town, September 6, 2013. REUTERS/Mike Hutchings

JOHANNESBURG (Reuters) - South Africa's top construction firm, Aveng Ltd, reported a drop in full-year profit on Tuesday, hit by weakness in its domestic construction business, and the company warned labour unrest could dent profit again this year.

Like other building firms in Africa's top economy, Aveng has struggled to increase profit since the end of the building boom for the 2010 soccer World Cup held there. It has also grappled with restive labour unions and sluggish demand from the public sector.

Public sector infrastructure spending in the coming year was likely to be slower than previously expected, Aveng said.

Shares of the company slid 3.6 percent to 28.19 rand.

"The main focus is on the fact that they are talking about slowing infrastructure spend and the effect that the strikes have had on the productivity and profitability," said La'eeq van Heerden, head of Africa equity trading at Stanlib.

Aveng said it was hit by a net operating loss at its domestic construction business in the year to end-June, after labour unrest last year and losses on some major contracts.

Construction and auto manufacturing workers have staged strikes in South Africa in recent weeks and the company said labour disruption posed a "material risk".

"It's a very unpredictable environment and it's difficult for us to fully ascertain what the potential impact will be in the year ahead," acting Chief Executive Kobus Verster told Reuters.

Aveng said its order book, or pipeline of projects, was down 6 percent from the end of December, to 37.4 billion rand.

Diluted headline earnings per share totalled 115.9 cents a share, down 3 percent from 119.8 cents a year earlier.

Headline EPS, the main profit measure in South Africa, excludes certain one-time items.

Aveng last month warned it expected a decline in profit, surprising investors who were expecting solid growth and sending its shares down more than 11 percent to their biggest one-day fall in about five years.

Shares of Aveng are down about 8 percent this year, underperforming a 10 percent rise in the All-share index.