Stefanutti sees opportunities in various sectors, swings to interim profit
24TH NOVEMBER 2022
BY: SCHALK BURGER
CREAMER MEDIA SENIOR CONTRIBUTING EDITOR
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JSE-listed construction group Stefanutti Stocks reported a profit of R9.25-million for the six months ended August 31, compared with a loss of R188.48-million posted for the six months ended August 31, 2021.
Contract revenue from continuing operations decreased to R2.87-billion for the interim period, from R3.15-billion in the prior comparable period, but operating profit improved to R54.03-million, compared with R8.93-million in the prior period.
Earnings a share for total operations were 5.53c, compared with a loss a share of 112.69c in the prior period, while the headline loss a share narrowed to 25.02c from a 67.12c in the prior period.
Stefanutti’s order book ended the period at R6.3-billion, of which R1.6-billion arises from work beyond South Africa’s borders.
“We continue to see numerous opportunities across sectors including mine, transport and civil infrastructure, water and wastewater treatment plants, renewable energy, industrial plants, oil and gas, pipelines and dams to name but a few.
“We remain poised to take advantage of these opportunities as they present themselves,” Stefanutti CEO Russell Crawford says.
In terms of its restructuring plan, the group is currently in negotiations with its lenders to extend the capital repayment profile of the loan, as well as its duration to February 2024 owing to further delays beyond the group’s control in resolving contractual claims and compensation events on certain projects.
These include the slower-than-anticipated sale of identified operations, and the non-implementation of the materials handling and tailings management subdivisions transaction.
“The benefit of the extended restructuring period provides a greater degree of confidence in anticipated cash flows, which will ultimately result in a reduction of the previously stated residual loan balance of R420-million,” says Crawford.
Further, the transaction relating to the disposal of the group’s 49% interest in the United Arab Emirates operation became unconditional on July 18.
Regarding the sale of the Mozambican operation, the requisite approval of shareholders was obtained on November 22. The transaction remains conditional and is subject to the fulfilment of remaining conditions precedent.
Meanwhile, Stefanutti continues to pursue a number of contractual claims and compensation events in relation to the Kusile power project.
Since August 2021, the group has secured payment of a combined R110-million for measured work and the Dispute Adjudication Board (DAB) rulings.
Substantial variations are still being agreed with State-owned power utility Eskom. The outcome thereof will determine whether further certification will be secured for measured works or whether the variations will be referred to the DAB, Crawford says.
Stefanutti and Eskom have entered into an interim arrangement for the purposes of agreeing or determining the contractor’s claims and facilitating the dispute resolution process in February 2020 for all delay events up to the end of December 2019.
This process involves the appointment of independent experts to evaluate the causes, duration and quantification of delays, Crawford highlights.
“To date, the group has submitted two provisional claims to the experts after taking into account all payments received to date on the project, including an overarching preliminary and general cost claim of R337-million, and a subcontractor overarching preliminary and general cost claim of R194-million.
“It is intended that the group will submit the remaining claims relating to construction costs, commissioning costs and interest and finance costs to the experts by December. The experts will review all claims, draft agreements and narrow issues of difference for referral to the DAB for a decision as per the memorandum of understanding with Eskom.”
Stefanutti envisages that the DAB will issue its final binding decision during the second quarter of 2023, and noted that either party has the right to appeal.
“At this stage, the group’s claims team is unable to quantify the value of the potential awards as the claims must follow due process. Therefore, these provisional claims have not been recognised in the financial statements,” Crawford says.