Aveng Limited has history spanning over 125 years, having been initially established as a modest construction company in South Africa. Today, the group is a multi-disciplinary construction and engineering company with expertise in steel, manufacturing, public infrastructure, mining, concessions and water treatment, and can regard itself as a true global powerhouse. Aveng is involved in numerous mega-projects that extend across South Africa and the rest of Africa, the Middle East, Australia, New Zealand and South East Asia.

Subsidiaries in the construction and engineering sector include Aveng Grinaker-LTA, and Australian-based company McConnell Dowell. Meanhwile, Aveng Mining is one of just four deep-level shaft sinking companies on earth, and is involved in everything from underground development and contract mining, to opencast mining, mineral procession, construction of infrastructure and supply of mining equipment.

Aveng Manufacturing supplies construction projects, solutions, services and maintenance to the mining, oil, gas, water and transport industries. Aveng Steel supplies a wide product range to the steel and automotive industries in domestic markets.

The company’s revenue stood at R 43.9 billion in 2015. Due to a number of factors, financial performance of the group has suffered considerably in recent times, with Aveng share prices experiencing a dramatic decline.

In the 2014/15 financial year, Aveng was subjected to ongoing deterioration in its key markets, particularly in the steel sector, and recorded a massive headline loss of R 578 million.

The group is now scrambling to recover their losses through the stabilisation of underperforming business units, by employing new management, reducing costs and downsizing.

Decline in commodity prices has led to a decrease in the number of mining projects the company is involved in, so Aveng has lost business from one of its biggest income sources. There has also been a decline in major government-sponsored projects, causing Aveng’s engineering activities to suffer.

In Australia, McConnell Dowell has experienced a gap between completing exisiting projects and finding new work, and tendering large projects is costly with no prospect of recovering costs unless the tender is secured.

Other issues such as labour unrest and restructuring costs also cost the group. Amongst all the negatives, Aveng is confident that rail operations will make some progress as new railways are constructed in Africa.

After a widespread overhaul, the board has said that it is satisfied that with the Aveng’s management teams, and believes that the group has the experience and capacity to return underperforming business units to profitability, whilst dealing with difficult trade conditions expected over the medium term.

Despite the difficult conditions affecting most companies in its sector, Aveng has still registered poorer share performance than most others. The group has not made an annual profit since 2013, and Aveng share prices plummeted by 58 cents in the last six months of 2015.

Aveng share prices have made negligible gains in 2016, but weak demand, commodity price pressure and a struggling construction sector are all set to negatively impact the group’s performance for the future. With the group struggling to keep its head above water, most analysts agree that the purchase of Aveng shares would be a foolhardy move at present.

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