OPEN-CAST miner and equipment supplier Buildmax is winding down its Diesel Power Civils business due to "tough trading conditions" in SA, especially in construction.
The group expects to complete the process by the end of next month, saying prospects for civils contractors have "been depressed in the past two years", and that there are "no meaningful projects on the horizon".
"Despite management’s efforts within the civils division to tender competitively for the scarce civils jobs available, we have been unable to secure any meaningful future projects," the group said on Monday.
This had led to job losses among some contract workers and to some voluntary retrenchments.
Certain technical skills would be kept within the Diesel Power Opencast Mining business, of which Diesel Power Civils was a division, so Buildmax could still tender for civils work that was strategic to its mining activities.
"Because mining and construction are so tough, we have to have a lean operating structure," CEO Terry Bantock said. He said low commodity prices and a lack of government spend on large infrastructure projects had forced the decision to shut down the civils unit.
"It’s sad for us to close it down, but we are up against the majors."
These firms included JSE-listed construction and engineering groups such as Murray & Roberts, WBHO, Aveng and Stefanutti Stocks, which competed with Buildmax in bulk earthworks markets, along with private contractors.
"There aren’t many projects around — guys are fighting over scraps," Mr Bantock said. "We couldn’t afford the luxury of carrying the overhead during the down time."
The average contribution to group turnover of Diesel Power Civils has been about 15% in the past three years, or about R450m of about R3bn.
From 2008, the group had repositioned itself as an open-cast coal mining contractor and supplier of construction materials. Subsequent difficult trading conditions made worse by a drop in mining and construction equipment resale markets had contributed to significant impairments that put pressure on profits.
Investec economist Kamilla Kaplan said yesterday the downturn in SA’s manufacturing sector activity had intensified last month, with the business activity sub-index sinking to its lowest level since the 2008-09 recession. She said fewer new orders signalled a worsening of weak conditions in the mining and energy sectors.