Road builder Raubex says its materials division has had "consistent activity" in the mining sector in the six months to August, which helped to offset a slowdown in commercial aggregate sales in Gauteng.
But it says that, overall, the local construction environment is not conducive to growth and the company will continue to explore international opportunities to supplement group revenue streams and pursue acquisitions in the materials division.
The latter accounts for nearly half of the group’s profits, which fell in the interim period. It focuses on four areas: contract crushing, production of aggregates for commercial markets, asphalt production and materials handling and beneficiation for the mining industry.
"The period in review saw the group’s road-construction companies execute their order book efficiently and deliver some of the best-quality road work in the country. Our infrastructure division capitalised on affordable housing opportunities, which assisted in offsetting the delay in award of renewable energy projects," Rudolf Fourie, Raubex CEO, said on Monday.
But he said the South African National Roads Agency (Sanral) was far behind in awarding road tenders as it battled with the Treasury over technical specifications. The Treasury had become stricter about procurement issues, which was meant to enhance value-for-money offers for professional services.
Revenue was down 2% to R4.67bn, as operating profit slipped 6.1%, to R371m. Cash flow from operations sank 14.2% to R464m, with headline earnings per share inching up 0.4%.
Group capital expenditure rose to R253m, from R235m in the first half of financial 2017. The order book fell to R7.52bn, from R8.2bn in the same period previously. An interim dividend of 45c per share was declared.
Dexter Mahachi, an analyst at Momentum Securities, said Sanral’s problems of executing tenders had a negative effect on the construction sector.
"While [Sanral] projects were an important part of Raubex’s income stream, we believe the company’s management [has] the capacity to overcome [this] and seek other avenues for revenue generation given time. We believe that [Sanral] fixing such low-hanging fruit would be positive for the general economy."