South African construction giant on shaky ground

International engineering firm Aveng is facing significant troubles, as the company posted an operating loss of over R350 million.

Aveng has three operating brands in the infrastructure, building and mining space – McConnell Dowell, Built Environs, and Moolmans.

The company is listed on the JSE but operates in Australia, New Zealand, the Pacific Islands, Southeast Asia, and Africa.

The company, formerly known as Anglovaal Engineering, used to be the largest construction company in South Africa, but tough economic conditions and own goals gutted it.

It was involved in a construction collusion scandal involving numerous large projects and racked up huge debts as part of its global expansion strategy.

When the South African government cut its infrastructure spending, the local economy stagnated, and the commodity market experienced a downturn, Aveng started to suffer.

The company implemented a turnaround plan in 2018, which included disposing of non-core assets, cutting costs, reducing debt levels, and improving its operational performance.

The strategy showed good results. In its 2021 financial year, Aveng raised R492 million through a rights issue, reduced debt by R1 billion, and recorded its first headline earnings since 2014.

The stock became a favourite among punters who saw it as an outstanding penny stock to make a quick buck.

However, as significant challenges remained, Aveng’s share price has been on a downward trend since 2022.

Aveng’s share price has been down over 33.5% in the year to date. This is largely due to the company’s share price plummeting by over 28% following its latest trading update.

This trading update and Aveng’s interim results for the six months through December 2024, released on 18 February 2025, revealed a disappointing performance.

The firm’s revenue fell by 8.1% to AUS$1.4 billion (R16.6 billion), down from AUS$1.5 billion (R18.6 billion) in December 2023.

This is mainly due to a slowdown in the Australian and New Zealand infrastructure markets.

The company posted an operating loss before capital items of AUS$31.0 million (R356 million), compared to an operating profit of AUS$15.5 million (R192 million) in December 2023.

In addition, the firm reported major project losses, including a combined loss of AUS$76.7 million (R885 million) from its Jurong Region Line project in Singapore and its Kidston Pumped Storage Hydro project in Australia.

This saw the firm report a headline loss of AUS$34.4 million (R399 million) compared to headline earnings of AUS$11.3 million (R137 million) in December 2023.

The company made a basic loss of AUS$32.7 million (R378 million), reversing a basic profit of AUS$0.8 million (R11 million) in December 2023.

However, Aveng also reported an improvement in cash on hand to AUS$256.1 million (R3.0 billion) from AUS$227.7 million (R2.8 billion) in June 2024.

In addition, the company announced that its Moolmans business secured a 60-month contract at Gamsberg with increased production volumes, revenue, and profitability.

The firm added that its separation strategy, which will create two independent businesses, is progressing.

Aveng plans to split its business segments into two distinct and independent entities, McConnell Dowell and Aveng.

The company said this structure will make it easier for the companies to autonomously access suitable funding pools to meet their unique investment needs

Aveng said in its interim results that a range of implementation options are being assessed and will be pursued in the coming year.