Struggling Raubex scores with wind and solar projects
Infrastructure development group secures R500m work as revenue and operating profit decline in interim period
Listed infrastructure development group Raubex has secured wind and solar projects worth R500m that are part of SA’s renewable energy independent power producer procurement (REIPPP) programme.
The new work will soften the blow of the dearth of road construction projects amid a declining order book especially from the SA National Roads Agency (Sanral).
In the year ended February 28, the order book from Sanral, which historically accounted for about 25% of Raubex’s orders, fell to 12%. The Sanral tenders declined 46.8% to R962m.
The government’s low infrastructure spend has hit Raubex’s construction division, which is made up of road surfacing and rehabilitation, and construction and earthworks businesses.
Speaking after the release of the company’s results for the six months ended August 31, in which the two divisions reported huge decreases in revenue, CEO Rudolf Fourie said on Monday the group had secured the R500m civil works contracts and was in negotiations for additional work, also worth R500m.
Fourie said the company was a subcontractor for the Droogfontein solar photovoltaic (PV) power project in the Northern Cape and the Copperton wind farm, also in the Northern Cape. Raubex’s REIPP contracts will ease the pressure on the group’s underperforming road construction divisions.
Fourie said the company continued to experience difficult conditions in the road construction sector “where low volume work experienced during the first half of the year has resulted in the group’s asphalt and bitumen supply operations being right-sized in order to adjust to the current level of demand”.
The “right-sizing” resulted in the retrenchment of 280 employees in the road surfacing and rehabilitation business. The retrenchments cost the company R13m.
The company also retrenched 29 employees in the road construction and earthworks business and incurred retrenchment costs of R1.8m. The infrastructure business retrenched 32 employees, incurring R600,000 in retrenchment costs.
Raubex’s revenue decreased 4% to R4.5bn, while operating profit fell 57.4% to R157.8m. Earnings per share decreased 73.4% to 35.7c and headline earnings dropped 72.8% to 35.7c. The company declared an interim dividend of 12c, down from 45c in the corresponding period last year.
Owing to the subdued nature of the domestic market, the company has looked beyond the borders of SA for growth.
“We are trying to get more work in the rest of Africa,” Fourie said. The group has targeted Kenya, Gabon, Zimbabwe, Cameroon and Namibia, he said.