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| Murray & Roberts has secured a leading role in a number of long term projects associated with South Africa’s infrastructure investment program. |  |
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| Construction products SADC
Background Murray & Roberts first entered the supplies and services market in the 1950s, acquiring various businesses over time that manufactured and traded construction materials and services in the domestic and regional building and infrastructure markets. The nature and focus of the supplies and services businesses have changed often over the more than 50 years since then. Until 1998, the Group owned the largest ready mix concrete and aggregate business in the country, which, combined with Blue Circle Cement (now Lafarge) through the 1990s, represented its largest and most profitable business segment. A fundamental business principle has always been to service the construction industry in general rather than Murray & Roberts specifically. There have seldom, if ever, been times when vertical integration or "Buy Murray & Roberts" instructions have applied. This has focused management teams on service, quality, product development and price competitiveness to the extent that other group companies constitute on average no more than about 5% of the average debtor book. Murray & Roberts acquired the Elgin Group in 1980, which changed the basic make-up of the Group and initiated a transfer of the share listing from the construction to the industrial sector on the JSE Limited. More industrial assets were acquired over the following 15 years, few of which delivered any sustainable value and most of which have since been disposed, closed or liquidated. Each business in this sector is a market leader in its own right, with management teams that have to always understand the responsibility this brings to them and the Group. Global economic crisis The primary commodity inputs for the products manufactured by this cluster are steel, bitumen, cement, aggregate and electricity. The common output is transport logistics. While steel and bitumen have been extremely volatile both in price and availability over the past year, cement and aggregate price increases have been high and steady, with availability only being impacted over a short period leading up to the global economic crisis. The electricity story in South Africa is well reported and transport logistics costs have increased steadily over a number of years at a level significantly ahead of core inflation. The economic storm that has blown through this sector over the past financial year has been severe, both in volatility and intensity. The most significant impact has been felt wherever steel is a primary input or output product. The Group's stock impairment value at 30 June 2009 was in excess of R200 million. With the exception of asphalt, product demand was down in the second half year and pricing more competitive.
Leadership Andrew Langham and Rob Noonan have shared the responsibility of leading different aspects of this cluster of businesses over the past year. Leadership in the materials businesses has been stable through the year with a number of appointments made to both deepen capacity and extend empowerment. Trevor Barnard joined the Group as managing director of Rocla at the start of the year. Karl Albertse joins Hall Longmore in October 2009 as operations general manager. Laurence Savage returned to South Africa from Australia in August 2009 and has been appointed in an interim leadership role at Hall Longmore, primarily to ensure the final commissioning of the ERW upgrade and new coating facility. Orrie Fenn joins the Group in November 2009 from his current position as chief operating officer of PPC and will take over full executive responsibility for the cluster. This will release Andrew Langham to take up a new appointment as financial director of Murray & Roberts Limited, the main operating company of the Group.
Murray & Roberts Steel
The capital investment program to increase production capacity was completed during the year and most facilities have been refitted with automated processes to improve productivity. The newly configured rolling mill and upgraded melt shop at the CISCO steel mill are fully operational and offer some scope for new product development. Refurbishment of rolling mills acquired in Mauritius in 2008 was completed during the year and the upgraded mill is operational, positioning Murray & Roberts Steel as the primary manufacturer and distributor of reinforcing products in the Indian Ocean Islands. Expansion plans to build a new rebar yard in Dubai were deferred during the year. Murray & Roberts Steel avoided retrenchment during the year by terminating all overtime work, implementing a program of stringent cost savings and intensifying its focus on cash and working capital. Stability is expected to return to the steel market in 2010 at more realistic pricing levels. Major projects in the power and transport infrastructure sectors will continue to generate significant growth in the domestic market during the period beyond 2010. The company will extend its focus to opportunities with medium and small contractors to ensure its long term sustainability. Global expansion has been impeded by economic conditions in the Middle East where the business will explore opportunities in other geographic locations in the region to secure growth beyond 2010. Planned public sector investment in transport, tourism and social infrastructure in Mauritius offers the potential for significant growth in the Indian Ocean Island region. Hall Longmore
Hall Longmore maintained its leading position in a buoyant domestic steel pipe market as it continued to benefit from investment in infrastructure in the liquid fuels and water pipeline sectors. The main focus during the year was on the fast track contract to supply approximately 710 kilometres of pipe for Transnet's Multi-Product Pipeline. The company also secured its first export order for trilaminate external coated pipe to Australia amid strong competition. The order involved the shipping of 60 kilometres of gas pipeline to Queensland. The major upgrade of the ERW plant to a capacity of 250 000 tons per annum has been delayed due to commissioning challenges in the coating plant which has impacted the company's production program. Much Asphalt
Much Asphalt secured projects to deliver 1,4 million tons of asphalt to a number of major public sector road infrastructure programs over a period of two years, including the Gauteng Freeway Improvement Program, projects on the R300 and N1 near Cape Town and the Johannesburg Bus Rapid Transport System. Under the leadership of managing director Phillip Hechter, constant upgrades to plant enable the company to incorporate the latest and most environmentally sustainable technology into its processes. Transformation is a key element of the company's market strategy and it has achieved level 3 contributor status. Rocla
Rocla has traditionally generated 40% of its revenue from product supply to residential and commercial projects but this declined to 20% as the development market continued to contract. The impact of this market shift was buffered by contracts to supply to projects in the power, roads, airport and water and sanitation infrastructure sectors. Under the leadership of managing director Trevor Barnard, the company embarked on a climate change initiative to improve its operational efficiencies and market engagement in an increasingly competitive environment.
Technicrete/Ocon Brick
Technicrete fared better than many of its competitors during a challenging year, registering a lower than the average market decline in sales of cement to concrete product manufacturers, and a consequent gain in market share. The company continued to generate 70% of its activity in the building and infrastructure markets and 30% in mining. Under the leadership of managing director Paul Deppe, Technicrete continued to expand its business with the upgrade of its kerb plant in Olifantsfontein and acquisition of a new production facility in Polokwane to facilitate growth in a strong market. Although market conditions are expected to remain tough in the new financial year, the company enters the period with a market leading position and will continue to expand its product range in high volume infrastructural concrete products.
Ocon Brick continues to operate at subsistence levels in a difficult market. Andrew Langham
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