Aveng Looking to Australia for Acquisitions

The giant South African construction and engineering company Aveng Ltd. is looking beyond its borders to Australia for acquisitions, although it's keeping its eye on the South African market as well.

Specifically targeted industries Aveng is interesting in acquiring are those involved in water and power. They're also hoping to find larger companies in their strategy to expand.

Aveng has a strong cash position it can tap if it chooses to acquire the desired companies, making it a nice option if they want to keep costs and debt under control and make the transactions far less costly. At this time the enjoy about $409 million in available cash to use if they want.

Although preferring larger companies, Aveng also said they're open to acquiring smaller companies, especially if they fit in with their existing operations, which could help them grow in that regard. Sometimes those can backfire though as the synergies aren't always what they are thought to be, and they can drag on a company rather than enhance an existing business.

Analysts do like Aveng, as they have strong cash flow and are able to be disciplined in that as the net cash position they hold reveals. Even so, they did have a weaker second half with net income falling by 21 percent and sales dropping by five percent.

So far steel sales has been a good producer for them, as it has grown by eight percent already in the first two months of the year, with global demand seeming to be increasing.

Although Aveng is identified partially as being a construction company, its core business is steel, and construction is more of a side business which doesn't add much to the overall performance of the company.

Unfortunately for Aveng, they've started to become dependent on government spending on infrastructure projects in order to grow; something that is not a good dependency to get into, as that can be unreliable and a real uncertainty.

This is probably one major reason they're looking for more investments outside of South Africa toward Australia. The markets that could come with that are important for the long term growth of Aveng.