Management reviews > Review of operations

 

1: Reinforcing steel for Paramount Apartments, Claremont, 2: Duraset’s revolutionary DuraguardTM system, 3: Infraset supplied all the sleepers for the ballasted track for the Gautrain, 4: Nelson Mandela Multipurpose Stadium, Port Elizabeth, Steeledale.

     
  2009  
Rm  
2008  
Rm  
Revenue   3 245,1   3 149,1  
Capital expenditure   118,8   148,5  
Major markets   Southern Africa   Southern Africa  
Employees   3 401   3 592  

  • Stable revenue of R3,2 billion but margins under pressure.
  • Lowest cost producer status maintained.
  • Steeledale:
    performed well despite steel price fluctuations and lower volumes.
  • Infraset:
    delivered satisfactory results in difficult market.
  • Duraset:
    maintained good throughput but strong rand affected exports.
  • Lennings Rail Services:
    maintenance and plate-laying services better than expected.


Introduction

Aveng Manufacturing comprises four business units; Steeledale, a market leader in manufacturing steel reinforcing bars and mesh for the concrete industry; Infraset, a manufacturer of concrete products for the infrastructural market; Duraset, a manufacturer of steel and concrete products for the mining industry; and Lennings Rail Services, a supplier of a highly sophisticated range of rail construction and maintenance services.

Steeledale is driven by activity levels in the civil engineering and building industry, Infraset is linked to the building, civil, rail and transportation industries, Duraset’s performance is driven by the mining sector and Lennings Rail Services is dependent on transport volumes and mining activity.

Across its business units, Aveng Manufacturing continually aspires to be a low-cost, high-quality producer and all elements of the business are focused on achieving and maintaining that position.

Aveng Manufacturing reported revenue of R3,2 billion for the year ended 30 June 2009. Operating margins were pressured as a result of adverse market conditions, in particular, the impact of the weaker steel price and downward pressure on volumes.

Solly Letsoalo will be joining the Group as managing director of Aveng Manufacturing with effect from 1 October 2009.

Aveng Manufacturing aims to grow market share through the introduction of new lines of business and investments to increase its capacity.

Steeledale

Operating environment

The global downturn led to a downward trend in reinforcing and rod prices. The steel reinforcing market was supported by public sector work on existing projects, including stadia and roads. However, tender activity in the public sector is slow and replacement work on completion of these projects is required to support demand in the medium term. The overall reinforcing steel market deteriorated in the second half of the financial year.

Safety

Safety at Steeledale improved significantly during the year with the DIFR decreasing from 2,06 in 2008 to 0,76 in 2009. A senior Safety Executive Forum was established during the year which will continue to drive the safety culture across Steeledale.

Performance

Steeledale performed well, despite the impact of fluctuating steel prices and decreased volumes due to short supply in the first half of the year. Having shown only a slight decrease in volumes for the year, the business unit defended its margins.

Steeledale focused heavily on tight stock management to moderate the impact of price volatility, while maintaining sufficient inventory to satisfy customer demands. Targeted stock levels have been achieved.

Steeledale launched a new product, Rollmat, which was used on the King Shaka Airport and the Moses Mabhida Stadium in Durban. A significant achievement during the year was the pace of installation at the Nelson Mandela Multipurpose Stadium where Steeledale actively contributed to building the stadium in record time.

Objectives

Steeledale Reinforcing is focused on maintaining the productivity and service level improvement achieved during the last three years, with continued focus on mechanisation and pre-fabrication at its site operations. Steeledale Mesh will continue to focus on product development and should bring new products to market within the next financial year.

Outlook

Further delays in public sector project awards could negatively impact the market in 2010. However, the drop in interest rates is expected to spark development activity in the industrial and retail segments. Steeledale will maintain its focus on product development and investments will be centred on R&D for on-site reinforcing steel. The business unit will continue to enhance productivity, especially in the site environment, and continuous improvement projects are targeting further efficiencies. Stringent stock management processes are in place to optimise stock levels across Steeledale to mitigate further steel price volatility.