Raubex, a construction and materials handling group, posted a record order book with a positive outlook following a prolonged downturn in the sector, which peaked after the 2010 World Cup.
The second half results showed a marked improvement with headline earnings of R148m vs a loss of R48m at the interim results to August 2020, but do not yet reflect the potential turnaround metrics potential.
This is predicated on the back of a roll out of road projects, including upgrades, new road networks, highways and re-habilitation by Sanral, with local and provincial authorities playing a secondary role.
The groups order book has escalated from R11 billion at the interim stage to R17 billion due primarily to new contracts from Sanral in the Roads and Earthworks division.
The materials division experienced strong demand for its aggregates quarrying, material handling and mining operations. The robust mining sector helped revenues grow 10.8%. The operating profit declined by 17.8% and is likely to improve once industry growth resumes, resulting in margin expansion. This division generated 80% of the groups operating the profit of R364 million.
Group CEO Rudolph Fourie, referred to higher industry capacity utilisation as well as sector consolidation, with many players no longer operative following the prolonged downturn, as reasons for potential higher margins in the in the year ahead. He indicated that a group margin objective of 10%, if achieved, should be a positive driver for group prospects.
The Infrastructure division should pick up due mainly to renewable energy expansion schemes like solar and wind, and projects such as the Beit Bridge border post.
Although revenue only increased by 1.30% to R8.85 billion, this was significantly better than the first half decline of 10.5% due to the Covid-19 pandemic preventing non–essential activities.
Raubex has been strongly cash generative, even in the challenging first half, resuming the interim dividend payment in lieu of withholding the final dividend for 2020, which was a positive signal at that time. It recently declared a 29 cents dividend payment, with a major cut back in capex and other expenditure resulting in net cash growth quadrupling to R1.1 billion. The strategy of cash preservation is ahead of a burgeoning order book. As execution of new business takes place, additional working capital will be a pre-requisite. This is in the back of a buoyant mining sector with rising commodity prices and a rollout of infrastructure projects.
Raubex has a niche operation in Western Australia in the mining and roadbuilding sectors. It is only involved in smaller contracts, cautiously feeling its way, in areas in which it has expertise.
The results were above market expectations with a positive outlook enabling the company to continue to deliver quality results. This was aided by a record order book and a strong possibility of an infrastructure economic recovery. The share price is reflecting a turnaround in prospects, with the price up by around 14% to R32.00.