Raubex divisions profitable again
Raubex, which was one of the few companies to have been resilient in the decade-long slump in SA’s construction market, says that all three of its operating divisions returned to profitability in its second half, but that this will not be enough to offset its poor performance in the first half, which was heavily affected by lockdown restrictions.
Raubex, one of the few companies to have been resilient in the decade-long slump in SA’s construction market, said on Tuesday that all three of its operating divisions have returned to profitability in the second half of its financial year, though this would not be enough to offset the poor performance in the first half, which was heavily affected by lockdown restrictions.
The company said in a trading update that its headline earnings per share for the year ended February are expected to drop 45%-65%, as a result of the lockdown measures, which were meant to control the spread of Covid-19.
Raubex, which was founded in 1974 and listed on the JSE just before the global financial crisis in 2007, has been able to grow its earnings for the better part of the past decade during which some of the players along the value chain battled for survival.
It is only in 2011 and 2012 that its headline earnings per share which is the primary measure of profit in SA that excludes one-off items dipped. The one-off cost of fast-tracking transformation in the construction industry as required by the government in 2017 also took a shine off its performance.
“Most of the larger listed construction companies built extra capacity in the wake of the 2010 World Cup. They took risks by expanding offshore, whereas second-tier companies like Raubex has largely been focused on the SA market,” said Drikus Combrinck, portfolio manager at Capicraft Investments.
The divergences between the companies are also reflected in the share price, with Raubex gaining 50% on the JSE over the past five years, while the construction and material index shed about a third in its value in the same period.
On Tuesday, the share price was down 2.8% to close at R27.51, giving the company a market value of R4.9bn.
Raubex benefits from the rollout of road infrastructure projects through the SA National Roads Agency, which oversees the national road network.
Through its road and earthworks division, Raubex builds new roads and highways, as well as upgrading and rehabilitating existing roads.
It is exposed to the mining industry through the materials division, which focuses on commercial quarries, contract crushing and the handling and processing of materials.
Raubex said on Tuesday it had noted a pick-up in tendering activity in the SA construction sector, saying its bids were under adjudication and pending award. Its order book stood at R11.74bn at the half-year mark that ended in August and the company has since secured $172.2m (R2.5bn) to expand and upgrade the Beitbridge border in Zimbabwe.
The company said it was encouraged by progress regarding the procurement of energy from independent power producers, aimed at plugging SA’s energy gap.
RAUBEX BENEFITS FROM ROAD INFRASTRUCTURE PROJECTS THROUGH THE SA NATIONAL ROADS AGENCY