Bulk earthworks and civil engineering group Protech Khuthele Holdings remains focused on its strategy to expand its mining infrastructure footprint in Africa. This is essential as activity in South Africa’s construction industry remains muted, CEO Antony Page tells Laura Cornish.
The last financial year (to end February 2012) was tough for Protech Khuthele Holdings (PKH) as the aftermath of a repressed construction economy continued to delay the number of new business opportunities.
In comparison with most business sectors, the mining industry has been fairly robust, particularly across the African continent.
And PKH’s annual turnover results bears testimony to this – with about 77% attributable to work from the mining industry.
The company specialises in mining infrastructure, which includes the construction of slimes dams and access roads. The company also dabbles in contract mining.
While local construction and large infrastructure project investment spend continues to lag, the group remains focused on extending its reach in the infrastructure value chain and is selectively pursuing projects in the rest of Africa.
“Expansion in South Africa and the rest of Africa by junior miners is now opening up opportunities for second tier contractors such as PKH, which can provide a wide range of value added services. We can provide the junior market with an innovative, speedy business model that is well-suited to their cash-tight business approach. The challenges of operating in Africa, however, do lead to longer establishment cycles and contractors need to be compensated for the additional risks,” says Page.
With this in mind, the company has adopted a strong project selection criteria system for African mining projects: it looks at the country itself, the logistics and risk, cash value, etc., and determines what work is best suited to its capabilities and appetite.
“In most cases, we intend to follow our current client base into Africa as they open up new projects, which will also help us to learn and better understand the countries we will move into,” Page continues.
PKH does already have a fair amount of African working experience under its belt, thanks so some of the industry’s blue chip mining players it has worked for in the past. It is currently involved in four projects in Africa. These include two in the Democratic Republic of the Congo, one in Zambia and another in Sierra Leone. Its African work experience extends into Mozambique, Zimbabwe and Botswana as well.
The focus of new management, which took over from 1 September 2011, has been on repositioning the group to weather the current market environment while gearing up for growth in 2013, when it anticipates a strong market recovery.
One of the core areas of the business that has been prioritised is its plant policy, which according to the company has been modified without compromising its service quality.
Replacement cycles for plant and equipment have been extended within their warranty periods to optimise asset utilisation and reduce capital requirements, with the overall effect of reducing the inherent financial risks of the business.
The future outlook
“We have seen evidence of improved tender activity since the beginning of the new financial year (March 2012), both in the mining sector and commercial infrastructure,” Page notes.
There are numerous opportunities to work in Africa, in mining and related infrastructure, but the company will adopt a conservative and highly selective approach in relation to clients and partners.
The total order book, which consists of awarded projects currently in progress in the contracting business unit, amounted to R1.1 billion (at 29 February 2012).
In addition, the total value of work tendered, submitted and awaiting adjudication and award to the successful contractor is currently valued at some R2.4 billion on a probability weighted basis.
With its internal repositioning and capacity building, Protech believes it is on a sound footing to benefit from these opportunities. Initiatives to extend its capability in specific areas of the construction value chain are on track; PKH recently announcement it was establishing a civils division. This should provide further growth as the group delivers more diversified solutions to its customers