A KEANE EYE: The path less travelled

Governments will need to continue providing services, and astute private parties will look for value in opportunities passed up by others who have lost their nerve. However, anyone looking to buy should use a sharp pencil and look for cost effectiveness. Providing footpaths (and to a lesser extent cycleways) is a core activity of councils. Personal observation would tell most people that it can also be an expensive one. With low ground moisture and tree roots close to the surface, many footpaths require regular rebuilding if the council is to avoid litigation when people trip. Given the kilometres of path built and maintained across Australia each year, coming up with a solution to just one of these areas of concern could save a substantial amount of money. So it’s lucky Jean Monger of Sydney-based company Global Equipment Manufacturing seems to have found an answer to most of the problems mentioned, and others besides. First – the slow speed of construction and labour-intensive nature of the work. Even if you’re not on a scale to use the Fast-Lane concrete paver he has built, the finishing of paths laid using conventional boxing and laying can be sped up by using a hand tool known as the Spinner. This Spinner rides the formwork and quickly distributes the concrete, providing an even finish without requiring concreters to bend over to screed the concrete. Trials have shown that using this can allow up to five times the volume of concrete to be laid and finished, compared to traditional methods. Secondly, the maintenance issue. Monger has exclusive NSW, ACT and Queensland agency for an Australian product called Tripstop, which is embedded in the concrete and has been proven to stop displacement of slabs relative to one another, eliminating the trip hazard. Monger calculated that for a 3m wide cycle path he can provide Tripstop free of charge and still viably put the concrete on the ground for $20 a cubic metre less than with conventional methods. That sounds like something worth putting to the test, but there are further products in the wings that can sweeten the picture even further. A newly developed binder developed in conjunction with another company does away with the need for Portland cement and is claimed to be able to withstand 50-megapascals downward pressure within 24 hours of being layed – apparently the biggest problem initially was ensuring that it did not “go off” too quickly. Monger has been an advocate of porous pavements for a long time, and has developed a pavement that incorporates over 85% of post-consumer waste and has fine pores that allow water to penetrate but exclude dirt and trash. This pavement has the dual benefits of eliminating the standing water hazard and allowing stormwater to be absorbed into the soil rather than transported through the stormwater system. In many ways, the picture seems too good to be true, but trials with two councils have substantiated Monger’s figures, and the benefits seem attractive enough for others to seek to replicate them.

Lend Lease CEO adds MD to CV

McCann took up the chief executive officer’s position on December 16, taking over from Greg Clarke, who had been at the company’s helm for six years. The company last week announced plans to axe more than 1700 jobs worldwide after announcing a $596 million loss for the half-year to December 2008. The group said it was planning to cut 400 jobs in Australia.

Warranty issues dent Cummins bottom line

Cummins said the change in earnings reflects an $82 million increase in warranty liability, offset by a $9 million reduction in variable and incentive compensation as a result of this change.For the full 2009 calendar year, the company’s revised EBIT was $US1.22 billion and net income was $US755 million. The earnings revisions affect the fourth quarter results of the company’s Engine and Component segments.Cummins said the warranty liability was revised to reflect a change in estimate in the warranty costs primarily for mid-range engine products launched in 2007. “In late February, our analysis of recent warranty payments indicated that a revision to our initial warranty liability estimate is appropriate,” the company said in a statement to the New York Stock Exchange.Cummins said modifications had reduced the failure rate of the products causing the increased warranty claims, and the increase in the warranty liability reflected the higher than expected costs associated with these repairs.The company also reaffirmed the financial guidance it gave earlier this month, with sales in 2009 expected to be around 20% lower than 2008.

Construction industry up, says ABS

The ABS said the trend estimate for the value of all construction work done in the quarter was $35.4 billion, a 2.6% increase compared to the September quarter. Broken down into sectors, the trend estimate for residential building work was up 0.2% to $10.5 billion, while non-residential building work was up 0.5% to $7.6 billion. Engineering work done in the quarter was up 4.7% in the quarter, with a trend estimate of $17.1 billion.However, according to Master Builders Australia, the strong growth experienced by the industry over the past five years is set to change.MBA chief economist Peter Jones said the key to the outlook for the construction industry over the next two years will be whether an upswing in the residential sector can offset looming weakness in non-residential building and engineering activity as the previously strong pipeline of work begins to fall away.“The outlook for engineering construction will begin to turn in line with the fall in commodity prices, although a massive pipeline of resources-related work is yet to be done and state government infrastructure spending should cushion the fall,” Jones said. “The credit crunch is the issue for commercial builders being choked by tough lending criteria imposed by financial institutions,” he said. “Funding issues continue to threaten commercial building projects with softening market conditions to leave a significant hole in building activity.” For residential building, Jones said confidence was the missing link. “Once households believe that the economic situation has stabilised, a housing upswing will gather momentum,” he said. Jones said residential building faces another ratchet down in activity during the first half of 2009, but will be boosted by fiscal and monetary policy stimulus measures as the government attempts to recession-proof the economy amid the global financial crisis.The ABS said its data is comprised of estimates based on a response rate of about 80% of the value of both building and engineering work done during the quarter.

Record profits for Bluescope, but outlook weaker

Bluescope chief executive officer Paul O’Malley said the positive result was driven predominantly by improved business spread and the weaker Australian dollar in the first quarter, which delivered an underlying first quarter net profit after tax of around $430 million. “However, in the second quarter of the reporting period, export sales from Australia were materially curtailed by the economic downturn around the world and the substantially lower demand for steel globally and in Australia,” O’Malley said.“We are also seeing lower international steel prices while still experiencing peak raw material costs.”He said this means the company expects to see a negative underlying NPAT contribution for the second half of fiscal 2009, the extent of which is dependent on demand and spread.”Government stimulus packages may translate into some improvement in economic activity later this calendar year, but it remains to be seen how it will affect steel demand,” O’Malley said.”We are focused on four key areas: a robust balance sheet; strong liquidity position; disciplined capital expenditure management and delivering an expected $150 million savings on existing and new cost management programs,” he said.

Cemex predicts 20% dip in ‘09 pre-tax earnings

The building materials manufacturer said the global financial crisis has presented the company with “unprecedented challenges”. Cemex said it expects its earnings before interest, tax, depreciation, and amortisation for 2009 to sit somewhere between $US3.5 billion and $3.7 billion, nearly a 20% drop on the company’s full year EBITDA for 2008 of $4.3 billion. Domestic cement and ready-mix volumes were predicted to fall in most counties around the world, with an expected decline of 15% in cement and 17% in ready-mix volumes in the United States. Anticipated reductions in Australian volumes include a 10% dip in ready-mix, and a 13% drop in aggregate. The company said its 2009 forecast does not take into account the current economic stimulus packages of various countries, which include substantial infrastructure investment. During 2009, the company said it plans to reduce its net debt by $3.6 billion to $14.3 billion, which, it says, will restore financial flexibility.

Cummins prepare for 20% sales dip in ‘09

Cummins suffered a 10% drop in engine sales and a 13% fall in components sales for the December quarter, but sales in its power generation and distribution segments were up. But the manufacturer said declines in its engine and components segments, driven by sharp demand drops in the global truck and construction markets, more than offset gains in power generation and distribution. Overall, fourth-quarter sales fell 6% to $US3.29 billion compared to $US3.52 billion during the same period in 2007, with net income dropping to $US89 million, down from $US198 million a year ago. Engine sales during the quarter were down to $US1.94 billion ($A5.06 billion) from $2.16 billion in Q4 2007, while component sales fell from $US777 million in Q4 2007 to $US676 in Q4 2008. Cummins’ power-generation business segment was up 6% to $US887 million and the distribution segment was up 19% to $US557 million. “Given our record-setting performance during the first nine months of the year, the rapid drop in demand in the fourth quarter as a result of the global recession was a major disappointment,” said Cummins chairman Tim Solso. “At the same time, we moved quickly to lower our costs and tightly manage our capital spending, and already have taken further action in early 2009.” By the end of March 2009, the company is planning to have reduced its global workforce by more than 1,400 salaried professionals and more than 1,300 hourly manufacturing-plant employees, or about 6% of its total workforce. In January, Cummins announced it would reduce its worldwide professional workforce by at least an additional 800 people by March 1 and freeze pay for most salaried workers. In addition, the company’s officers had their pay reduced by 10% for 2009.

Hardie profits also down 56%

The fibre cement producer announced a profit of $US16.5 million ($A25 million) for the fourth quarter of 2008, which the company said was impacted by further declines in the United States housing market.Hardie said its net operating profit for the quarter, including its asbestos, Australian Securities and Investments Commission expenses, asset impairments and tax adjustments, was US$111.0 million, which was mainly due to the effect of a $US93 million foreign exchange adjustment on its asbestos liability.The company said the exchange adjustments had been favourably affected by the recent depreciation of the Australian dollar against the United States dollar.

NZ construction takes a turn, but there’s hope: BIS Shrapnel

The forecaster said the building downturn in New Zealand, particularly in the residential sector, is being agitated by the domestic recession and deepening global downturn. BIS Shrapnel has forecast building activity in New Zealand to remain weak in 2009, constrained by delays in, or the cancellation of, business investment and expansion plans. The forecaster said the housing market would also remain subdued due primarily to job insecurity, rising unemployment and tighter bank lending policies.Adeline Wong, author of a BIS Shrapnel report called “Building and Construction in New Zealand 2008-09 to 2014”, said she expected the building sector in New Zealand, including residential and non-residential activity, to contract by almost 20% this financial year.“We expect weak dwelling approvals to persist for the whole of 2009, before a modest rebound in the March quarter of 2010,” Wong said. “Thereafter, a combination of strengthening economic growth, low interest rates, improving home affordability, pent-up housing demand, higher net overseas migration levels and an expanding housing stock deficiency, will drive a strong rebound in dwelling consents in 2010-11 and 2011-12, before stabilising over the following two years to 2013-14,” she said.Wong said the silver lining was that, in the short term, the commercial sector will hold up for at least another year, as commercial projects that are more advanced in their construction stages will be completed. She said the civil engineering sector would also provide a buffer to the construction sector through increased spending on infrastructure over the next five years and this would see the civil engineering sector expand by more than 10% per annum over the next two years. “This extra spending will enable the completion of projects under construction and also fast track new projects,” Wong said.

John Holland heading to court over fatality

Comcare said it would allege that the Leighton subsidiary contravened section 16 of the Occupational Health and Safety Act 1991 by failing to take all reasonably practicable steps to protect the health and safety at work of its employees and that this failure resulted in the workplace fatality on May 6, 2008.The accident occurred while a team of five John Holland workers were involved in moving precast concrete decks to the end of a jetty under construction. The precast concrete decks were being transported on two jinkers that were being pushed by a front end loader. A jinker is commonly used to transport large loads. During this procedure, a worker’s foot became trapped under wooden scaffolding planks on the jetty. The worker was fatally injured when he was run over by the wheels of the jinker.