Towards building sustainable value for all stakeholders

JSE listed building and construction company Aveng Ltd today released its Interim Results for the six months ended 31 December 2004. The 12% increase in revenue to R6 664m contributed to a headline earnings growth of 55% to R133m. Strong growth in headline earnings is supported by lower finance costs and a solid performance from Associates and Joint Ventures including the cement company Holcim (South Africa) which is 46%-owned by Aveng.

The impact of local economic conditions varied within Aveng’s different clusters. Revenues from consumer related activities enjoyed higher demand resulting from lower local interest rates. Uptake for Steel & Allied, and Cement’s products which support these markets increased.

However in the Construction cluster, which includes Grinaker-LTA and Australian subsidiary McConnell Dowell, the Rand’s 10% appreciation during the Interim period eroded international revenues, on projects awarded at weaker currency levels. It also affected clients’ investment decisions in currency sensitive sectors including mining, energy and export. Notwithstanding these tough markets, Construction activities reduced their loss from the previous six months by R168m to an operating loss of R18m. Grinaker-LTA has been restructured into smaller business units to improve operational focus and address increasing Rand strength.

“Residential construction is buoyant, but heavy construction has suffered from Rand strength,” confirms Carl Grim, Chief Executive of Aveng. “Government spending has been slow in coming through, but before year-end, we expect to see more action relating to infrastructure for the 2010 Soccer World Cup, and new projects to increase capacity at Eskom and Transnet. Our order book, at 82% of revenue, is within the target range of 70% to 100% and gives us flexibility to participate in government infrastructure projects.”

Significant investments in additional capacity in Steel & Allied, and Cement during the past three years were well-timed and enabled Aveng to participate in the increased retail demand and residential property boom. Steel & Allied produced growth of 14% and 16% in revenue operating profits respectively.

“Holcim’s performance was excellent, but we are starting to see cement demand tapering off – the sector grew by 13.9% in the six months to December 2004, down from 17.3% in the previous six months. We’ve benefited from our investment in 500 000 tons of additional capacity but are taking a measured approach to further increases. The market is positive, but we don’t expect any tonnage growth on last year,” explains Grim.

The sale of 25% of Aveng’s South African subsidiaries to a broadly based empowerment consortium led by TisoGroup, and the conclusion of a seven year convertible bond with a 6.125% coupon strengthen the Group’s ability to meet its strategic goal delivering value to stakeholders.

“Going forward, we have the wherewithal to work with government and SME’s to contribute meaningfully to building sustainable communities throughout South Africa. The critical mass provided by our balance sheet and our broad base of investors, as well as a balanced approach to doing business provides us with the capability to deliver large and complex projects at lower risk,” concludes Grim.

Interim results announcement available from www.aveng.co.za

For further information contact:

Carl Grim 
Chief Executive 
011 779 2802 
082 903 8346

Dennis Gammie 
Financial Director 
011 779 2803 
082 828 0044

Available for telephone interviews between 10:30 and 12:00 on 7th March 2005 to respond to questions relating to interim results.

Date