Public-sector contracts are accounting for a rising proportion of construction company Stefanutti Stocks’ R12.8-billion order book, particularly as demand from mining clients softens.

CEO Willie Meyburgh expects public- sector contracts to comprise about 40% of turnover in the coming year, representing one of the highest-ever public-sector contributions for the JSE-listed group. Last year, the public sector accounted for 33% of group turnover.

However, he stresses that the projects are not confined to South Africa, with the company having been awarded roads contracts in Zambia, as well as a number of Southern African countries.

Public-sector projects also feature prominently in the company’s R82-billion opportunity pipeline, which includes railways upgrades and stations, domestic and regional roads projects, marine developments and social infrastructure such as hospitals and schools.

The overall contribution of government contracts could also grow further should the much-debated multibillion-rand public infrastructure roll-out move into full implementation.

By contrast, the outlook for the mining infrastructure and services markets has weakened in line with uncertainties in the outlook for commodities and a domestic investment climate that is being weighed down by labour volatility in the platinum sector.

Meyburgh is also not overly concerned by the possible risks associated with the change in profile of the group’s order book, saying it represents a “good mix”.

He also points out that most of its domestic orders are from State-owned companies such as Transnet, Eskom and the South African National Roads Agency, which were diligent payers.

That said, Stefanutti Stocks’ contract at the Kusile power station site, in Mpumalanga, is currently lossmaking and will remain so until some major claims have been settled. It is also pursuing claims related to the Cecilia Makiwane Hospital project, in East London.

The company is optimistic that it has a handle on the problems that have afflicted its building unit, which reported a R151-million operating loss for the year to end February. It is expecting the division to begin making a positive contribution during the current financial year.

The group posted an after-tax profit of R118-million for the year from a loss of R162-million in 2013. However, last year’s result had been dragged down by a R323-million Competition Commission fine.

“Our main focus is returning all business units to profitability,” Meyburgh says, adding that, while it is keen to grow orders, it is also strongly focused on the quality of its order book. At the end of February last year, its order backlog stood at R8.5-billion.