JSE-listed Raubex is optimistic about its future prospects despite expecting to report a slump in earnings of between 130% and 150% for the six months to August 2020 compared to the previous corresponding period.
The construction group said on Thursday the contract opportunities it has tendered for in South Africa remain encouraging and reported that it was recently awarded a significant R1.48 billion 45-month contract by the SA National Roads Agency (Sanral) for the upgrade of the N3 Section 2 from Dardanelles to Lynnfield Park in KwaZulu-Natal.
Shares in Raubex rose by 5.77% on Thursday to close at R20.90.
The N3 contract award follows Sanral reporting in August 2020 that it was ready to implement R30 billion worth of construction projects that form part of President Cyril Ramaphosa’s drive for “shovel-ready” infrastructure development to stimulate the economy post Covid-19.
Raubex CEO Rudolf Fourie confirmed on Thursday that the N3 project was among the 50 Strategic Infrastructure Projects (Sips) gazetted by the government as part of the R340 billion first tranche of its infrastructure expenditure plan to revive the economy post Covid-19.
Fourie said this project is one of about six projects that form part of the upgrade of the N3 Durban-Pietermaritzburg corridor.
He said the project involves upgrading and building two additional lanes on 67.2km of the N3 and the widening of all the structures over the N3.
Sanral put the project out to tender last year, with the tender closing in November 2019.
Raubex in June 2020 reported an “unprecedented” increase in road construction and rehabilitation tender activity, with R25 billion in tenders issued by state-owned enterprises (SOEs) and provincial and municipal road departments in the six months to February 2020.
The group added on Thursday that it is encouraged by the notice published in the Government Gazette in July in which the Presidential Infrastructure Coordinating Commission designated 18 Sips, including 50 sub-projects.
It said these designated projects emanated from the Sustainable Infrastructure Development Symposium, which was hosted by President Cyril Ramaphosa on June 23 2020 and focused on the prioritisation of infrastructure development to support structural transformation, growth and job creation.
“The company will be monitoring the development of these Sips closely in the period ahead,” it said.
Peregrine Capital executive chair David Fraser said he “absolutely welcomes” that Sanral is starting to award these contracts, which have such a multiplier effect when it comes to materials and labour or job creation and in assisting contractors to return to financial health.
“It couldn’t have come too soon, and thank goodness it did come. There are five or six contracts that are about R1.5 billion to R1.8 billion and it sounds like they [Sanral] are in the throes of awarding them at the moment, so that is obviously good news,” he said.
Raubex said on Thursday the decrease in earnings is a result of the lockdowns declared in response to the Covid-19 pandemic.
It expects to report a loss per share of between 19.4 cents and 32.3 cents for the six months to August 2020 compared to earnings per share of 64.6 cents in the previous corresponding period and a headline loss per share of between 17.6 cents and 29.3 cents compared to 58.6 cents.
Raubex expects to release its results for the six month to end August 2020 on or about November 9 2020.
It said all businesses other than those providing essential services as defined by legislation were required to be closed for the duration of the lockdown, which commenced on March 26.
But it said the majority of Raubex operations in South Africa were able to commence under level 4 lockdown status from May 1, with a gradual increase in efficiencies to near normal levels of operation towards the end of July.
It said all of the company’s South African operations are now fully operational.
Raubex said its operations in Western Australia performed well during the period and were not materially impacted by Covid-19 while its operations in the rest of Africa in Botswana, Mozambique, Namibia and Cameroon were impacted by lockdowns, travel restrictions, quarantine periods or cross border logistical issues.
The group said it has maintained a strong balance sheet during the period with strict working capital management and cash preservation measures resulting in cash and cash equivalents growing to an average daily balance of R1.5 billion during August 2020.
The company’s interest bearing debt amounted to R844.4 million at August 31, it said.
Fourie said the second half of Raubex’s financial year will be better than the first because there will not be the impact from the Covid-19 lockdown but warned that the company’s performance in the second half cannot be compared with the first half because of the low base caused by Covid-19.
“Covid-19 was massive, so the second half will be better. All of the Sanral projects, with the first one awarded, have a lead time of three months for community engagement.
“We can only start in February next year so we should see an improvement in H1 [the first half] of our next financial year,” he said.