Construction firms see post-Covid recovery, but workplace safety, dengue weigh on productivity

CONSTRUCTION firms have seen a turnaround in fortunes in the first half of the year as loosened Covid-19 restrictions have allowed more migrant workers to enter the workforce, giving the industry a much-needed shot in the arm.

Still, it appears that workplace safety and dengue infections continue to weigh on productivity as companies ramp up their work.

According to data from the Ministry of Trade and Industry (MTI), construction activity grew 3.3 per cent year-on-year in the second quarter of this year. This came on the back of expansion in both public and private sector construction output.

For the half-year ended June 2022, Chip Eng Seng reported a 75.1 per cent year-on-year rise in construction revenues to S$288.4 million. This was driven by higher contributions from 5 HDB projects in Sengkang, Pasir Ris and Woodlands, as well as a Land Transport Authority contract relating to the construction of the Jurong Region Line.

Notably, the Marsiling Grove HDB project in Woodlands was taken over by Chip Eng Seng after Greatearth Corporation and Greatearth Construction went bust last year.

Similarly, Lian Beng Group reported a 49.6 per cent increase in construction revenue to S$639.5 million for the financial year to May 31. The company attributed this to the easing of safe management measures that had restricted the entry of foreign workers into Singapore.

Lian Beng noted, however, that the value-add of the construction sector remains 23.7 per cent below its pre-pandemic level as migrant worker inflows have not been sufficient to meet industry demand. It also cited rising interest rates and higher construction material costs as potential headwinds.

Aside from the shortage of workers, companies have also seen productivity impacted by workplace accidents.

In a report dated Aug 12 on ready-mix concrete supplier Pan-United Corporation , Phillip Securities Research senior research analyst Terence Chua said that while revenue for the company met his expectations, profit fell short as a result of higher staff and materials costs.

Pan-United posted a net profit of S$13.5 million for the half-year ended June, 94 per cent higher than the same period a year earlier.

Chua further noted that the company’s management had indicated that volumes declined by 10 to 15 per cent as a result of stop-work orders issued by the authorities at construction sites. He maintained “buy” on the company with a lower target price of S$0.54, from S$0.68 previously, on account of the “still uncertain business environment”.

On Aug 4, CAD Associates and KHC Development were issued stop-work orders and fines by the Ministry of Manpower after safety inspections found the 2 companies had unsafe worksites.

As of Aug 3, there have been 32 worksite fatalities this year. There were 37 fatalities reported in 2021 and 39 in 2019.

Hong Leong Asia’s chief executive Stephen Ho said at the company’s earnings briefing on Aug 12 that workers who had gone home during the pandemic and subsequently returned may not be as productive as workers who had remained in Singapore. On average, he said it takes about 2 to 3 months for returning workers to reach an “acceptable productive stage”.

Steel solutions provider BRC Asia noted in its third quarter business update on Aug 2 that the spate of stop-work orders issued as a result of workplace accidents and dengue outbreaks had impeded project progress at worksites.

As at Aug 12, Singapore has recorded 24,039 dengue cases, eclipsing the 5,258 cases logged in the whole of last year.

Still, in their report on BRC Asia dated May 12, CGS-CIMB analysts noted that these transient issues should be alleviated in the coming quarters and that the construction sector is likely to continue recovering. They maintained their “add” call on the company with a target price of S$2.50.

On Tuesday (Aug 16), shares of Chip Eng Seng closed unchanged at S$0.63, while Lian Beng Group’s shares fell 0.9 per cent or S$0.005 to close at S$0.525. Pan-United shares closed up 2.3 per cent or S$0.01 at S$0.45, while BRC Asia shares closed flat at S$1.70.