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Following last year’s divestment of its infrastructure and building businesses Murray and Roberts (M&R) has announced that it will no longer be operating in the Middle East. The sale of the infrastructure and building businesses excluded the Middle East operations, and the company has now “decided to exit the business in the Middle East.”

MandR pulls out of Middle EastAccording to a statement issued by M&R, all construction activity on projects in the region should be completed by the end of the 2017 calendar year.

“Closure of this business is very costly, mainly due to increased costs associated with the remaining construction work on the last four projects, as well as an unfavourable arbitration ruling on a subcontractor claim on a project that was completed in 2011,” the company said, adding that it expected basic headline earnings per share (HEPS) for the year ended June 30 to be more than 20% lower than in 2016.

Despite the fact that the company’s new divisions — oil and gas, underground mining, and power and water — were performing “in line with expectations”, M&R share price fell after the HEPS warning. In addition, earnings for its oil and gas business are expected to be at the “low point” for the 2017 financial year, the company said.

“Investment in this sector remains low and there are no major capital projects that the platform is working on,” M&R stated, admitting that it has not managed to secure any new major capital projects in this field. However, the company will be active in the Australasian commissioning market for at least the next 12 months. “Brownfields operations and maintenance opportunities are expected to be the main source of earnings in the short to medium term.”

In addition M&R expects strong growth in the short to medium term from the underground mining business as producers gradually start to re-invest in the mining sector. “There are encouraging signs that the metals and minerals cycle has turned. Market conditions have improved in South Africa, Zambia and Australasia, while the US and Canadian markets are a bit slower to recover.”

Reports indicate that Eskom’s Medupi and Kusile power station projects remain M&R’s main source of income for the power and water platform.

Image credit: Copyright: gyn9037 / 123RF Stock Photo

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