While still recovering from a R622-million Covid-19 impact on its business in the 2020 financial year, JSE-listed construction group Murry & Roberts (M&R) says its R60.5-billion order book will help in its upward trajectory following the pandemic.
The company had reported an order book of R54.2-billion at the end of September, but this has since grown as a result of the TransGrid project award to M&R’s subsidiary Clough, valued at A$1.5-billion.
The project is a 50:50 joint venture between Clough and Elecnor. ElectraNet and TransGrid are partnering to deliver an energy interconnector between the power grids of South Australia and New South Wales, with an added connection to Victoria.
The joint venture will deliver the engineering, procurement and construction of TransGrid’s portion of the project, which includes four substations and about 700 km of 300 kV transmission line.
M&R says its project pipeline is robust and includes four projects that are being negotiated on a sole-source basis, to the value of about R40-billion.
It is expected that these projects may be awarded before the end of the 2021 financial year.
In a statement released on November 26, the company says the effects of Covid-19 have been continuing into the 2021 financial year, more so in the group’s operations in the northern hemisphere, but generally not at the level that was experienced before.
M&R says client investment decisions continue to be affected by the pandemic and delays in new project awards have been observed across all three of its platforms, which were recently renamed.
The Oil & Gas platform was renamed the Energy, Resources and Infrastructure platform, the Power and Water platform was renamed the Power, Industrial and Water platform and the Underground Mining platform was renamed the Mining platform.
M&R continues to revise its expectations for the Covid-19 recovery, but remains well positioned to operate through the short- to medium-term uncertainty.
The company believes the economic stimulus packages announced by many governments should create new business opportunities in the medium to longer term.
What is in the process of shaping up in the natural resources, commodities, utilities, and energy and infrastructure markets supports the company’s group earnings expectations from the 2022 financial year onwards.
Moreover, M&R explains that the Energy, Resources and Infrastructure platform is structured into two regional businesses: the Asia-Pacific region and the Americas. The platform, which in recent years was focused on the liquid natural gas (LNG) sector, is recovering from a very low base and the strategic decision to broaden its market focus has enabled it to build a solid order book, with a strong pipeline of new work opportunities.
The platform has done well by establishing a prominent position in the specialist infrastructure and resources sectors in Australia, which are expected to remain buoyant over the next decade.
Australia’s post-Covid economic recovery will rely extensively on State-funded investment in public infrastructure, with transport infrastructure spend expected to peak at A$22-billion a year in 2023.
Mining majors in Australia are also forecasting a collective capital project spend of over A$3.5-billion a year for the next decade.
Currently, new investment in LNG projects is limited but demand is expected to increase in the longer term as the global transition to a carbon-neutral economy gathers momentum.
In the US, the energy market presents opportunity and Clough USA, as a new entrant to this region, is considering several partnerships that will make it a strong contender for engineering, procurement and construction projects.
The Mining platform is structured into three regional businesses: sub-Saharan Africa, the Americas and Australasia.
The platform continues to perform well, although the mining businesses in the Americas are experiencing a prolonged Covid-19 impact, manifesting as disruption to project operations and the softening of markets, which is creating order book pressure.
There is an increased demand for vertical shaft work in Australia and several projects are expected to be awarded during the current financial year. The platform is well positioned for this opportunity considering its service offering and the competitive landscape.
In sub-Saharan Africa, the start of work on a new project, and the award of two contracts have been delayed.
Capital investment in the mining sector continues mainly in brownfield expansions although it is expected that, considering commentary from mining clients, investment in new mines will return from 2021 onward.
Currently, the platform is experiencing order book pressure in all regions and it is too early to assess whether this has been brought about by Covid-19 uncertainty, or whether other dynamics are applicable and the commodity cycle might have reached a plateau.
Meanwhile, the Power, Industrial and Water platform operates in sub-Saharan Africa, a region which currently presents limited large-scale project opportunity, and available opportunities are being delayed. The platform has completed its scope of work at the Medupi power station, and work at the Kusile power station is expected to be completed by the end of the current financial year.
Apart from the LNG investments currently under way in Mozambique, which will present opportunity as from the 2022 financial year, capital investment in the short term in the platform’s target market sectors is expected to remain limited.
The recently announced infrastructure plan by the South African government to stimulate the economy should present opportunity in the medium term, especially the planned procurement of 11.8 GW of new non-Eskom generation capacity over the next three years.
Investment in the South African water sector, however, continues to be limited. An agreement has been concluded to relocate the platform’s Organica wastewater treatment demonstration plant to the V&A Waterfront.
During the year, the platform was awarded the Athlone wastewater project in Cape Town, which is due to start in the coming weeks.
Despite the uncertainty in the global economic outlook, the group believes its New Strategic Future strategy, and the assumptions on which it is based, remains sound.
M&R is focusing on its order book, improving project execution, improving liquidity, progressing digitalisation and exiting the Middle East, which the board believes will support a return to profitability before the end of the 2021 financial year and a path to earnings growth beyond.