JOHANNESBURG. – South Africa’s Murray and Roberts (M&R) will exit the Middle East as part of a R314 million ($23 million) disposal of its infrastructure and building business, it said on Monday after flagging lower full-year earnings.

The engineering and construction group announced the sale of the business, excluding the Middle East arm, in 2016 to Firefly Investments, which represents a consortium led by black-owned Southern Palace Group, as part of its drive to focus on the global natural resources sector.

“The disposal of the Infrastructure & Building platform excluded the business in the Middle East, as the buyer was not interested in acquiring this business,” the builder of the Burj Al Arab Hotel in Dubai said in a statement.

“The board thus decided to exit the business in the Middle East and all construction activity on projects should be completed by the end of the 2017 calendar year.”

As a result of the “costly” disposal, the company said it expected basic headline earnings per share (HEPS) for the year ended June 30 to be more than 20 percent lower than in 2016, which was 158 cents per share.

A further trading statement will be released as soon as there is a reasonable degree of certainty as to the likely range of the decrease, it said.

HEPS is the most widely watched profit gauge in South Africa and strips out certain one-off items.

Increased costs associated with the closure of the business are mainly due to the remaining construction work on the last four projects and an arbitration ruling on a subcontractor claim on a project which was completed in 2011, the company said.

The Johannesburg-based company will now focus on three core sectors — oil and gas, metals and minerals, and power and water.

Murray & Roberts, which is realigning its operations in markets with opportunities in the natural resources sector, said earnings for its oil and gas business are expected to be at the “low point” for the 2017 financial year.

Like its peers, Murray & Roberts is battling a market hit by a commodities price rout that has seen producers in the mining and oil and gas sectors cut spending and projects.

“Investment in this sector remains low and there are no major capital projects that the platform is working on,” the company said.

Strong growth in the short to medium term is expected from the underground mining business as producers gradually start to re-invest in the mining sector. — Reuters.

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