Steel fabricator taking survival steps as pressures mount
Since China reduced its steel consumption owing to overcapacity in February last year, over the past 18 months, the steel units at construction and engineering group Aveng have been pursuing several work streams to reacclimatise to the prevailing pressures.
“In 2014, we were focused on restructuring Aveng Trident Steel as well as rolling out SAP, which has assisted us [in centralising] procurement and sourcing. “This year, we have been focused on reduction of working capital cycle and rightsizing lossmaking businesses,” said Aveng Steel MD Hercu Aucamp last month during the group’s investor conference in Mpumalanga.
The company had also centralised key functions across the business units, such as human resources and information technology, finance and procurement, as well as reduced operating costs through the consolidation of its properties.
“What has also become of importance to the group, owing to the current market situation, is to continue to focus on positive cash flow through the down cycle by optimising inventory and improved debtor collections,” Aucamp pointed out.
Moreover, the group has strengthened and consolidated its management team, which has the necessary skills and experience to steer the business through the difficult market conditions currently being experienced.
Aucamp believes the longer-term prospects are more positive. He noted the emphasis given by the National Development Plan to increasing industrial development, supported by infrastructure. Aveng Steel is also well placed to benefit from an estimated 13-million tons of new steel expected to be consumed in South Africa over the next 15 years.
“In South Africa, we are forecasting opportunities in the power grid build-out – largely renewable power spend, Transnet rolling stock investment, clean fuels development and additional capacity in synthetic fuels, Gautrain expansion, South African National Defence Force spend, the construction of China City, in Modderfontein, and the free trade zone in Saldanha,” he highlighted.
Moreover, in the manufacturing space, Aveng Manufacturing MD Solly Letsoalo described
transport infrastructure as a key growth market. “Additionally, we expect housing and commercial building prod- ucts demand to remain strong,” he said.
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