SANRAL Returns

Key message: Comfortably surviving the Covid-19 lockdowns, increased SANRAL activity bodes well for Raubex. A large building order book shows the growing diversity of the group.

  • Raubex reported 1H FY21 results, with revenue and operating profit decreasing by 10.5% and 90% respectively due mainly to Covid-19 lockdowns.
  • However, cash generated from operations was a healthy R715m (up 72.4%) with working capital releasing R460m (debtors declined, advance payments positive). Raubex has maintained a strong conservative balance sheet and consequently paid a dividend of 24c (up from 22c in 1H FY20).
  • Materials: Revenue down 9.4%, operating profit down 26.1%. Exposure to essential mining operations during lockdown helped to minimise the Covid-19 impact. Demand from commercial quarries has been high (up YoY) as construction material demand remains at high levels The demand is coming from smaller construction projects – with management unsure of the sustainability or reason for the strong market (much like other management teams in the sector).
  • Roads & Earthworks: Revenue down 18.4%, operating loss R66.1m. Badly impacted by Covid-19 lockdowns, the order book outlook has started to improve with SANRAL starting to award large tenders again. Bitumen and asphalt volumes remain depressed but should benefit as late-cycle products as road construction picks up.
  • Infrastructure: Revenue down 0.7%, operating loss R18.7m. Also badly impacted by Covid-19 lockdowns and a R54.6m loss in Cameroon. Australia improved its contribution to R36.1m (from R23.1m). The Building division has an order book of R1.3bn – a growing diverse stream of earnings.
  • Raubex was awarded one large SANRAL project (R1.48bn N3 upgrade) and a further R8bn of large projects are under adjudication with management believing award is imminent. SANRAL’s tender activity has picked up over the last month with future tender prospects good. SANRAL have stated that funds are in place to be able to award projects

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