Raubex rightsizes as roads go to pot

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Raubex rightsizes as roads go to pot

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Published Date: 2018-09-13 | Source: Stephen Gunnion | Author: Stephen Gunnion

Raubex rightsizes as roads go to pot

The roadbuilding and construction group says spending on road infrastructure has dwindled while provincial government contracts have been delayed

Continued weak conditions in the local construction industry and particularly in the construction of roads have hit Raubex hard.

The roadbuilding and construction group says first-half earnings and headline earnings per share for the six months to end-August are likely to be between 70% and 80% down on a year ago due to lower spending on road infrastructure by the SA National Roads Agency (SANRAL) and delayed contract awards from provincial government. Its subsidiaries have been affected, both in the road construction operations and in the road rehabilitation and maintenance operations.

The company said it was assessing its operations that are exposed to the SA road construction sector due to the current market conditions and planned to reduce capacity in line with the current low level of demand.

Outside of the road construction sector, Raubex said its infrastructure division had experienced more favourable conditions and continued to expand its affordable housing and commercial building operations. It had also secured work in the renewable energy sector related to the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Due to the timing of financial close on those projects, it said construction works would only commerce in the second half of the current financial year.

The group's materials division, which contributed over half of total operating profit last year, continued to experience stable conditions in the mining services and commercial quarry operations.

Raubex said its diversified operations, strong balance sheet and rightsizing initiatives in its road construction operations positioned it well to manage the current challenging conditions. While it looked forward to a resumption of contract awards and a return to more normalised levels of budget spend by SANRAL, it was in advanced stages of negotiation on a number of large project opportunities in southern and east Africa which, if successful, would supplement its current order book and secure medium-term growth.

The group's shares declined after the release of its trading statement to close 2.5% lower at R20.20.

The group's shares declined after the release of its trading statement to close 2.5% lower at R20.20.





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