Materials save Raubex as roads crumble. The roadbuilding and construction group is right-sizing its roads business due to a big slowdown in work from SANRAL

Raubex's materials business has shielded it from a rocky performance from its roads construction division, helping the group report a small profit for the six months to end-August.

It says the low volume of work experienced during the period has forced it to right-size its asphalt and bitumen supply operations to the current level of demand. Raubex blames lower spending on road infrastructure by the SA National Roads Agency (SANRAL) and delayed contract awards from provincial government for the slowdown in its roads business. This has affected the construction of new roads as well as the rehabilitation and maintenance of existing ones.

Its materials division, on the other hand, has been the main contributor to first-half earnings with stable conditions in the mining services operations supported by some volume growth from its commercial quarry operations. Its infrastructure division has made good progress in executing projects in Cameroon and is well positioned to participate in the rollout of renewable energy projects in South Africa, where it says it's starting on secured work.

For the period, it's reported a 4% decline in revenue to R4.48 billion while operating profit fell 57% to R158 million. It said its material division contributed 121.5% of group operating profit, mitigating the losses in the road surfacing and road construction divisions. Headline earnings per share sank 73% to 35.7c and it's declared an interim dividend of 12c per share.

Its order book increased by 12% to R8.41 billion at the end of August, with close to a quarter of that representing contracts outside of South Africa in the rest of Africa and Australia. The order book for SANRAL decreased by 61.4% to R563 million. It's replaced it with work on road infrastructure managed by concessionaires as well as an increase in the order book from private clients mainly in the affordable housing and commercial billing sector.

If SANRAL work returns to more normalised levels, there should be a significant improvement in the road maintenance and road construction operations," Raubex said. "Overall conditions in the South African construction sector are expected to remain challenging and the short-term outlook is uncertain with the sector very much under pressure from the slow rollout of general infrastructure spend in the country and the current lower volume of work from SANRAL."

The group said it expected a challenging second half, with conditions in the SA construction sector remaining constrained. In the meantime, it plans to increase its projects in the rest of Africa and Western Australia, which it says is supportive of growth.

Its shares closed 0.3% down at R18.70 yesterday.

Raubex Group Posts Half Year Revenue Of R4,48 Billion, Down 4 Pct - Reuters News-HY ORDER BOOK OF R8,41 BILLION (H1 2018: R7,52 BILLION)-INTERIM DIVIDEND OF 12 CENTS PER SHARE DECLARED-HY HEPS DOWN 72,8% TO 35,7 CENTS PER SHARE

-- Nick Kunze (@NickKunze2) October 29, 2018