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Severfield-Rowen lowers 2011 expectations on weak economy

Structural steel group Severfield-Rowen is predicting a “poor” second half of 2011 as demand remains depressed thanks to the spluttering recovery. 

In a trading update to the stock market the company said its 2010 results, due out on 22 March, are expected to be in line with management expectations.

It said the company remains active in the first half of this year thanks to a strong order book in the UK of £217 million.

But echoing an earlier warning, the company said demand and pricing levels in the UK and Ireland remain depressed with a glimmer of recovery not seen for some sectors until early in 2012.

The update said:  “Whilst this remains the case, the outlook for the second half of 2011 is poor, very much in line with newly released industry forecasts.  A number of commercial office projects in London and some projects in the power sector are being deferred until 2012.  Overall UK demand for 2011 will be lower than expected as a result of slower than anticipated economic recovery, reducing public expenditure and significant increases in steel prices at a difficult point in the business cycle. 

“Although tender prices have bottomed, pricing will remain very tight through 2011 and will also reflect a deterioration in sector mix from that previously forecast.”

This has led the company to lower its expectations for 2011, but with the prospect for some recovery starting early in 2012.

The company is also stepping up its overseas activity as its new Indian JV, JSW Severfield Structres, which formally opened on 17 November 2010, has grown its order book to £15m and is trading in line with expectations.

And it has announced the signing of a new alliance with Zamil Steel Industries to provide enhanced structural steelwork design, fabrication and erection capability to clients in Saudi Arabia, the wider Middle East and North Africa.

The focus of the collaboration will be projects with high engineering content including stadiums, high rise buildings, airports, power plants and transport infrastructure.

Severfield-Rowen will operate with Zamil in Dammam, where several key Severfield-Rowen managers will be located.

President of Zamil Steel Adnan A Al Mansour said:  “We are very pleased with our new alliance with Severfield-Rowen and believe this will put both companies in a much better position to capture the highly engineered projects which are planned for the region. Through our discussions with Severfield-Rowen, we have already built strong relations between our respective management teams and we look forward to good future prospects as a consequence of this alliance.”

Severfield-Rowen chief executive Tom Haughey added:  “Severfield-Rowen Plc has been looking to further expand its activity into the regions of the Middle East and North Africa and we believe our collaboration with Zamil is the perfect vehicle. This will give us excellent opportunities to combine our skills and work together successfully on the many prestigious projects planned in these areas.  We very much look forward to a long and rewarding relationship.  This alliance is an excellent platform for both companies to realise their growth ambitions.”

The board also announced that Derek Randall, currently executive director with responsibility for business development and international, including JSW Severfield Structures in India, will join the company’s main board with effect from 28 February 2011.

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