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| OPERATIONAL REVIEW |
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| CONSTRUCTION MATERIALS & SERVICES CONTINUED |
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| Market |
| Steel products |
Murray & Roberts Steel once again delivered a solid
performance in a domestic market that saw increased
demand for steel products.
Murray & Roberts embarked on a strategy five years ago
to leverage the value chain in the steel sector and position
the Group for the significant growth expected in its
domestic and international markets. A major capital
investment program has doubled the Group's primary
steel production capacity and automated its production
processes to improve productivity. Human capacity has
been strengthened in the domestic market and significant
new capacity created in selected international markets.
Murray & Roberts Steel has developed sufficient capacity
in the domestic market to meet the demands of major
2010 projects, while maintaining ongoing business and
market engagement. The company has established a
dedicated bar yard facility in Olifantsfontein, Gauteng, to
deliver approximately 90 000 tons of steel to the Gautrain
project. This facility will cater for other major projects
beyond Gautrain.
A five-year program to enhance production from Cisco's
expanded furnace facility will be completed early in the new financial year. The new rolling mill increases capacity
to 220 000 tons per annum.
Subsequent to year end, Murray & Roberts acquired two
rolling mills in Mauritius and will become the primary
manufacturer and distributor of reinforcing steel products
on the island, extending the Group's market position in
the Indian Ocean Islands. The mills will be refurbished in
the new financial year.
Expansion plans in the United Arab Emirates are nearing
finalisation. Together with local partner, the Kanoo Group,
Murray & Roberts has secured a site in the development
area of Jebel Ali in Dubai, appointed a project manager
to build the factory and procured the machinery.
This expansion combined with the current facilities
in Sharjah, will quadruple the volume of rebar and
mesh Murray & Roberts supplies to the local market to
approximately 270 000 tons per annum, positioning the
Group as one of the larger suppliers to the burgeoning
Middle East steel market. |
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| Infrastructure materials |
Rocla and Much Asphalt both delivered exceptional
results in their relatively mature concrete product and
asphalt supply markets. A number of high volume
contracts were completed during the year.
The Rocla operations in Botswana and Namibia
performed to expectation. However, the Mozambique
operation continued to experience difficult trading
conditions and the assets there will be sold during the
new financial year.
Major sewer pipeline projects in the Western Cape were
successfully completed and the national presence and
capacity of Rocla has ensured a major role for the
business supplying products to Gautrain and the Medupi
power station project.
Jim Wood retired as senior cluster executive and
managing director of Rocla on 30 June 2007. He will
continue in a consulting role for the foreseeable future.
Lee Cochrane, the former general manager of Harvey
Roofing, has been appointed managing director of Rocla
with effect from 1 July 2007.
Much Asphalt grew market share during the year,
achieving record sales as infrastructure spending by
national, provincial and local government authorities
continued to increase. A growing reputation as preferred
supplier on major projects enabled the business to secure
major airport upgrade projects at OR Tambo International
and Cape Town International airports.
Much Asphalt maintained its role as technological leader,
becoming the first commercial asphalt supplier in
Southern Africa to achieve accreditation with the South
African National Accreditation Systems for quality assurance standards. During the year, Much introduced
an innovative hot-mix asphalt into the market for
demarcating routes, paths and walkways. The company
will invest in excess of R100 million over the next three
years in upgrading its plants and to ensure compliance
with international environmental standards. |
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| Building materials |
Concor Technicrete is the largest manufacturer of cement
paving products in South Africa with 14 factories
throughout the country. It produces paving blocks, roof
tiles and masonry products for the commercial building
and housing markets, and concrete products for
application in underground mining.
The company will undertake a significant upgrade of its
facilities and capacity during the new financial year,
including possible geographic expansion. Acquisitions
concluded over the past two years have been bedded
down and will add value to the business in future. New
acquisition opportunities in the masonry stock brick and
tile sectors are under consideration. Regrettably, the
business reported one fatality during the year.
Oconbrick delivered its performance expectations for the
year in spite of heavy rains at the end of 2006 which
impacted the curing of bricks and mining of clay. The
company installed a new high speed production line during
the year that has increased production capacity by 20%
to 380 million bricks per annum. There are plans to expand
its distribution network from a 100 kilometre radius to
140 kilometres.
Oconbrick has applied for new order mining rights to
access high quality clay reserves on land adjacent to its
property which offers another 20 years of production.
Harvey Roofing exceeded its performance expectations
largely as a result of new growth in the rural housing
market in South Africa, ongoing productivity improvements and improved key account management.
Judy van Es succeeded Lee Cochrane as general
manager of the company from 1 July 2007 and will
capitalise on the brand's strengths and increase
penetration into its traditional rural markets. |
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| Services |
 Johnson Arabia experienced another strong year in the
United Arab Emirates. The company has tracked the
growth profile of this market since it was launched with
just six hydraulic cranes in 2000. Under the leadership of
Gerald Topfer and in partnership with the Kanoo Group,
the company now has a fleet of 122 hydraulic and crawler
cranes and 350 access platforms based in Dubai, and a
fully-fledged business in Abu Dhabi. Plans to increase the
fleet by 50% and expand into Qatar are well advanced.
Toll Road Concessionaires (Tolcon) delivered solid earnings
growth in its toll road operations as traffic volumes
continued to grow. Tolcon currently operates the entire N3
toll route, the N2 North and South Coast toll roads and has
a 33% shareholding in the operation of the N1/N4
Bakwena Platinum highway. The company was transferred
to Concor during the year where Tolcon MD Jerome
Arendse and his team have taken responsibility for
management of Concor's facility operations.
Tollrail is the new company established to undertake
operations and maintenance work on the Gautrain
project. It commenced operations during the year
providing resources to the Bombela Operations and
Maintenance company. Gautrain has been a catalyst for
Tolcon to shift its strategic focus to the operation and
maintenance of transport infrastructure in general.
Regrettably, Tolcon recorded two fatalities at its toll plazas
during the year. |
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| Prospects |
 Construction materials & services operations will
continue to benefit from the expected growth in
infrastructure investment in the period leading up to
2010 and beyond. This is particularly the case in the
transport infrastructure, road refurbishment and power
sectors, with growth in the housing and commercial
building market set to slow down for a brief period.
Murray & Roberts Steel, Rocla and Tollrail have started
to experience the significant impact Gautrain will have
on their future prospects. Tolcon is well positioned to
play a major role in the proposed Gauteng Freeway
Improvement Program involving the upgrading and tolling
of approximately 500 kilometres of road.
In the domestic market, Murray & Roberts Steel has
developed sufficient capacity for all major 2010 projects.
This business was originally formed to cater for
the previous power station build program and will gear up additional capacity for the new Eskom capacity
expansion program. Internationally, Murray & Roberts
Steel will generate substantial additional growth in its
Middle East and Indian Ocean Island markets. Concor
Technicrete and Oconbrick both have expansion plans to
capitalise on ongoing opportunities in their domestic
building materials markets. |
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Operational review
