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Raubex’s earnings hit a donga
Raubex’s earnings hit a donga
Published Date: 2019-05-14 | Source: Stephen Gunnion | Author: Stephen Gunnion
The road building, materials and construction group says it's rightsized its roads and earthworks businesses due to a big drop in business from the public sector.
Raubex has scaled back its operations as it adapts to the toughest market conditions it's experienced in decades. While its materials division and a shift from the road construction sector into affordable housing and renewable energy has helped support the group, it still reported a sharp decline in full-year earnings.
Apart from operational issues, the group took an after-tax charge of R75.9 million owed by Zambia's Road Development Agency, which it's trying to recover, and a goodwill impairment charge of R51.5 million attributable to its road surfacing and rehabilitation division due to a big decline earnings from its asphalt business. This is one of the areas it's rightsizing to reduce excess capacity.
While it's run out of road in its asphalt business, its materials division experienced stable conditions in the mining services sector, while volumes rose in its commercial quarry operations. It said contract crushing operations continued to experience weak demand in line with the low level of demand in the overall construction sector.
Roads and earthworks suffered due to a big reduction in the volume of road construction and maintenance work from the public sector. It said results from the division were also adversely affected by violent community unrest in certain areas, impacting production efficiencies.
The infrastructure division experienced favourable conditions during the year and continued its expansion into affordable housing and commercial building operations. It said excess capacity was absorbed in the second half of the year due to the commencement of work in renewable energy programmes. So far, it's secured four contracts worth R729 million.
Its international operations in Australia, Namibia, Cameroon and Zambia reported mixed performances, held back by the Zambian roads charge.
Group revenue fell 0.3% to R8.52 billion in the year to end-February and operating profit dropped 69% to R207 million. Earnings per share (EPS) declined by 86.3% to 31.9c and headline EPS fell 75.1% to 57c. Excluding the two abnormal items, it said HEPS would have been 57% down at 98.8c. It's cut its final dividend by a third to 22c per share.
While it conditions in the local construction sector are likely to remain challenging, its expects an improved performance in the period ahead, due to stability in the materials division and a growing infrastructure business. The rightsizing initiatives undertaken during the year by the roads and earthworks division had better positioned the group to manage the challenges in the current market, while maintaining sufficient flexibility to participate in any potential increase in activity in the construction sector.
Its shares fell 1.4% to R19.79 yesterday.