Key message: Momentum remains positive despite weak results at Bauba and in Australia.
- Raubex reported 1H FY26 results. HEPS declined by 14.4% to 243.5c on a 1% and 28.7% decline in revenue and operating profit respectively. An interim dividend of 81c was declared. The order book increased by 8% to R30.44bn with continued strong activity in the roads and infrastructure sectors.
- Key takeaways from the discussion: While the result was negative, the underlying core businesses are operating well and the outlook is geared for growth. The performance was impacted by a R210m loss in a contract in Australia and a weaker performance at Bauba (lower volumes). Heavy rains in the first months of the period impacted the construction materials division.
- Bauba continues to be volatile and we are pleased to see that management has taken the view to exit Bauba at the right time. Stabilisation of production is the first step, with Kookfontein having mined through a lower-grade section and starting to produce PGM concentrate. The production at Moeijelijk was impacted by the change in contractor. B&E and SPH Kundalila have performed well and have benefitted from the Bauba operations as planned.
- The execution in the Roads & Earthworks division was impressive, with a high margin reported as a result. Two new large SANRAL contracts have been secured and this will replace the existing SANRAL work. The road concessionnaires continue to need to spend on roads before the upcoming handover and provincial projects have been secured. The Senqu River Bridge project is performing well and is reporting high margins.
- The Construction Materials division is seeing an uptick in demand in the Gauteng region – a positive sign as this region has been slow. Bitumen and asphalt sales should improve as roads projects reach the end of the construction phase.
- The Infrastructure division performed well, driven by renewable energy, the Parliament and water treatment projects. The buildings division is doing well as the property market was boosted by lower interest rates. Raubex has secured the Lebombo Border Post PPP project (R2-2.5bn).
- The loss in Australia is not a great concern as Raubex continues to only perform low-risk projects in the region.
- With a better 2H expected we maintain our Target Price at R66.