STEFANUTTI CONTINUES WITH RESTRUCTURING PLAN AND LENGTHY KUSILE POWER STATION DISPUTE

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Stefanutti Stocks has released results for the six months ended August 2021, reporting an increase in contract revenue from continuing operations to R3.2 billion (restated August 2020: R2.6 billion) with an operating profit of R5 million (restated August 2020: R161 million operating loss).

Earnings and headline earnings per share for total operations were reported as a loss of 112.69 cents (August 2020: 147.06 cents) and a loss of 67.12 cents (August 2020: 128.42 cents) respectively.

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The group’s order book for continuing operations sits at R4.6 bullion, R1.6 billion of which arises from work outside of South Africa.

Due to the impact of the pandemic and current dispute resolution processes, cash of R141 million has been consumed by total operations with the group’s total cash position having decreased to R531 million from R756 million at the end of February 2021.

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Stefanutti recognised its operations in regions, except for its mechanical and electrical business, which has been renamed ‘Mechanical Electrical Piping’. The regions are now reported as Inland, Coastal, Western Cape, Africa, and Mechanical Electrical Piping, added Crawford.

The group continues to progress with its restructuring plan to put in place an optimal capital structure and access to liquidity to position the group for long-term growth, said CEO, Russell Crawford.

The civil unrest during July negatively impacted the group’s coastal and inland regions, resulting in delays and damages suffered on seventeen projects with a financial impact of R8 million for which the group is assessing possible claims.

Review of operations

Inland Region (Building, Civils, Geotechnical, Materials Handling, Tailings management, Roads and Earthworks)

Inland’s contract revenue from continuing operations was reported at R1.1 billion (restated August 2020: R1.3 billion) with an operating profit of R34 million (restated August 2020: operating loss of R65 million).

The Civils, Geotechnical and Roads & Earthworks disciplines are profitable and performing to expectation. The result of the Materials Handling and Tailings Management disciplines were negatively impacted by the sale process, which as reported, did not materialise. The group is thus refocusing these operations and rebuilding their order book,” noted Crawford.

Opportunities exist for this region in transport infrastructure, water and wastewater treatment plants, mine infrastructure and in the renewable energy sector.”

Inland’s total order book as at August 2021 was R1.8 billion (restated August 2020: R2.4 billion).

Coastal Region (Building, Civils, Roads and Earthworks, Marine)

The Coastal Region’s contract revenue from continuing operations is R491 million (restated August 2020: R433 million), with an operating loss of R2 million (restated August 2020: R21 million operating loss), predominantly impacted by the civil unrest during July 2021.

Opportunities exist for this region in transport infrastructure, water and wastewater treatment plants, commercial, retail, and industrial projects in the private sector.

The region’s total order book as at August 2021 was R1 billion (restated August 2020: R1.6 billion).

Western Cape Region (Building, Civils)

Western Cape’s contract revenue is R677 million (restated August 2020: R139 million), with an operating profit of R22 million (restated August 2020: R15 million operating loss).

Opportunities for this region include water and wastewater treatment plants, framework agreements and commercial, retail, industrial plants, warehouses and data centres in the private sector.

The region’s total order book at August 2021 was R555 million (restated August 2020: R303 million).

Africa Region (Multi-disciplinary services in Botswana, Eswatini, Mozambique, Zambia)

The region’s contract revenue is R744 million (restated August 2020: R485 million), with an operating profit of R48 million (restated August 2020: R25 million operating profit).

According to Crawford, Botswana, Eswatini and Zambia are profitable and performing to expectation, with the Mozambique division’s order book being under pressure as a result of the ongoing unrest in the northern province.

He added that for this region, opportunities still exist in transport infrastructure, water and wastewater treatment plants, pipelines, dams, strategic fuel farms and commercial, retail, office, leisure, warehouses, mine infrastructure, renewable energy and industrial projects in the private sector.

Africa Region’s total order book at August 2021 was R1.7 billion (restated August 2020: R2.5 billion).

Mechanical Electrical Piping (MEP) (Mechanical, Electrical & Instrumentation, Oil & Gas)

MEP’s contract revenue decreased to R175 million (restated August 2020: R179 million), with an operating loss of R37 million (August 2020: R32 million operating loss). Included in these results is a fair value adjustment of R15 million relating to a property held for sale.

This business has been severely impacted by the effects the Covid-19 pandemic has had on global commodity prices, resulting in major plant maintenance and upgrade projects been delayed. However, opportunities in the traditional petrochemical sector for the Oil & Gas discipline are showing signs of improvement, with other opportunities also existing in renewable energy, industrial projects, clean fuels, tank farms, data centres, mining infrastructure and plant upgrades, shutdowns and maintenance.”

Crawford concluded by saying that as previously highlighted to shareholders in numerous announcements and updates since late 2018, the group continues to pursue a number of contractual claims and compensation events on the Kusile power project.

“Due to the complexity of the claims, the processes remain ongoing. No further details of the claims have been disclosed on the basis that it may prejudice the group’s position in defending the claims brought against it and in pursuing those claims brought against Eskom by the group.

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