The Burj Al Arab, completed in 1999 (Wikimedia Commons)

Companies

South African contractor Murray & Roberts to stop building

2 September 2016 | By GCR Staff | 4 Comments

After more than a century of operations, one of South Africa’s biggest contractors has decided to get out of building and infrastructure altogether, and will exit from overseas markets including the Middle East.

An early participant in Dubai’s building boom, Murray & Roberts won the contract to build the iconic Burj Al Arab (pictured), completed in 1999.

In 2004 it won a $1.3bn contract with Leighton of Australia to build a third concourse at Dubai International Airport.

Now, however, following a difficult run of years, it will focus instead on “the global natural resources markets”, it said while announcing financial results on 24 August.

“The decision to dispose of the Infrastructure & Building businesses supports the Group’s long-term strategy to focus its business on the global natural resources markets, and follows an extended period of careful planning and consideration,” said Henry Laas, Murray & Roberts group chief executive.

Bad news has dogged the firm in recent years. In the wake of the financial crisis it pulled out of the Dubai International Airport project in 2009.

In 2013 it was fined $30m by South Africa’s antitrust body, the Competition Commission, which accused it and 15 other construction companies of bid-rigging on contracts relating to the 2010 World Cup.

Other troublesome contracts included the liquefied natural gas facility in Australia – the Gorgon Pioneer Materials Offloading Facility – and Johannesburg’s Gautrain, a mass transit rail project.

The company first signalled an exit from the building sector in 2014 after hiring a strategy consultant to help it shape what the company called “the possibility of a quantum leap” into “a completely new era”.

“Currently about 80% of our business is in the construction space which is really very difficult to differentiate yourself in,” Henry Laas said at the time. “It’s like a commodity, and for that reason it is very competitive, it is very low margin, and we believe that we can enhance value if we increase our participation in other segments of the value chain, in other words into the engineering space and more so in the operations and maintenance as well.”

Now the company says that by 2025 it wants to be a “leading multinational group that applies its project lifecycle capabilities to optimise fixed capital investment”.

Targeted sectors are oil and gas, metals and minerals, and power and water.

Said Laas: “Growing our capability in specialist engineering, commissioning and asset support and maintenance services in these market sectors should yield higher margins and carry lower risk than services only provided in the construction segment of the project value chain, enhancing return to shareholders.”

Acknowledging the global slowdown in two of the firm’s targeted sectors, oil and gas and mining, Laas added: “The natural resource market sectors are cyclical and the Group will trade through this difficult period whilst implementation of this plan will position the Group well for the upturn.”

Image: The Burj Al Arab, completed in 1999 (Wikimedia Commons)

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