The economic slowdown is affecting financial and securities firms but one sector in Singapore is benefitting in some ways.
It is the construction industry, which has seen costs escalating over the past 12 months but is heaving a sigh of relief as the cost of construction materials has declined over the past few weeks.
Mr Simon Lee, executive director of the Singapore Contractors Association, was quoted in the media saying the economic downturn will most likely stabilise the cost of construction materials.
He noted the huge increase in prices of materials in recent times, which far exceeded their estimated cost during the tender stage of projects. The construction industry is not short of work.
The Building Construction Authority expects total public construction demand to reach between S$10.5 billion and S$13.5 billion this year as the Government is proceeding with infrastructure projects such as the Marina Coastal Expressway, MRT Downtown Line and Gardens by the Bayand the HDB building program.
Total construction demand is expected to top $30 billion in 2008, compared with $24.5 billion in 2007 and $16.7 billion in 2006. Given this backdrop, one company that will probably see improved earnings in 2008/09 is BRC Asia.
It said in its half-year results announcement: “The strong construction industry in Singapore will continue to be the key driver of growth for the reinforcing industry in 2008. The industry will continue to benefit from the high quantum of contracts awarded in 2007 and capacity utilization should remain high.”
Incorporated in 1938, BRC Asia is one of the first companies to pioneer the use of prefabricated steel reinforcement in Singapore. It is the leading steel reinforcing solution provider in Singapore.
It evaluates the design and steel reinforcement required and customizes prefabricated components for the project. It actively engages with engineers, contractors and steel fixers. Over the years, the company has successfully developed innovative prefabricated products for beam/column/pilecap, civil defence shelter mesh, and all types of precast components.
The Company’s vision is to prefabricate a major portion of reinforcement in reinforced concrete structures for on-site installation or for pre-cast elements. By transferring the laborious and unproductive in-situ steel fixing work to factory fabrication, it can help customers boost their site productivity significantly.
Substantial benefits in on-site manpower savings, shorter construction cycle, better buildability and productivity are now achievable BRC Asia operates three factories in Singapore with a total land area of 55,000 sq m. It has ISO9002 quality certification and the Singapore Quality Mark Certification for the manufacture of welded wire mesh (SS32) and cold reduced wire (SS18).
The turnover for the Singapore operation amounted to $120 million in the first half of this year, up 140% year-on-year. Net profit was up 28% to $2.9 million. BRC recorded a 167% increase to $248,000 in its share of the profit of a joint venture in China.
The industry will benefit from the high level of contracts awarded in 2007/2008 as there is generally a lag period of between 18 to 24 months between award and output. BRC’s wide range of reinforcing products should be a beneficiary of this output, given its strong growth track record in the last two years.
HG Metal has made a general offer for BRC Asia at 11 cents a share. BRC has been profitable every year since its listing and even when the market was at its worst in early 2000s. Last year, it recorded a profit of S$5.6 million on revenue of S$130 million.