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Infrastructure squeeze sees Raubex run out of road


Infrastructure squeeze sees Raubex run out of road

Company is hoarding R1bn in cash amid the worst period in 30 years in the SA construction industry

Siseko Njobeni

Listed infrastructure development group Raubex has no immediate plans to splash out even though it has cash of almost R1bn on its balance sheet.
The group, which has operations in SA, Botswana, Namibia, Mozambique, Cameroon, Zambia and Western Australia, expects conditions in construction to remain dire as the sector reels from a slow roll-out of infrastructure spending.
Amid a dearth of construction projects in SA, Raubex is hoarding cash and prefers to maintain a strong balance sheet. In the year to end-February, Raubex’s cash and cash equivalents was R962.6m.
“It is a tough sector and we are trying to save our cash to make sure that we can manage the tough times ahead. Having said that, there are opportunities that we know of. If they present themselves, we will look at them. But we need value-added acquisitions,” said CEO Rudolf Fourie.
He is proud the company has maintained a dividend policy of three-times cover. “We are consistent with the dividend cover,” he said. The company declared a final dividend of 22c a share, bringing total dividend for the year to 34c a share. 
In the 2019/19 financial year, which Fourie has described as the most difficult in his 30 years in the SA road construction industry, Raubex’s profit slumped from the previous R452.7m to R116.8m. Its total secured order book declined 2.2% to R8bn.
Established as a road construction and bridge-building company in 1974, Raubex grew through acquisitions after its listing in March 2007. It has recently expanded into infrastructure, now being involved in electricity and renewable energy, water and rail and housing infrastructure.
Mish-al Emeran of Electus Fund Managers said Raubex’s decision to hold on to cash is the right thing to do. “The markets Raubex operates in, specifically road construction and maintenance, are experiencing unprecedented challenges for various reasons, including the lack of spend from Sanral [SA National Roads Agency].”Emeran said the lack of work has led to low capacity utilisation, high operating risk, restructuring risks and low earnings quality. “A strong balance sheet is important in the current depressed market as companies are better able to weather the downturn. It also places Raubex in a position to bid on larger projects that require a high financial guarantee, which smaller players with limited cash are unable to provide”.
Emeran said it is not necessary for Raubex to sniff around for potential acquisition targets. “Their capacity utilisation is low, so they have excess capacity, and the market’s struggling with overcapacity. It is therefore debatable whether additional assets will be able to be put to productive use.”

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