Infrastructure development and construction materials group Raubex has warned that its earnings for the financial year ended February 2019, will fall by at least 20%, owing to continued weak trading conditions in the South African construction industry, particularly in the road construction sector.
The JSE-listed firm said on Tuesday that its earnings a share would fall by at least 46.7 a share, from 233.5c a share in 2017, and that its headline earnings a share would decline by 45.7c, from 228.6c in the previous corresponding period.
The weak trading conditions during the second half of the financial year had negatively impacted on Raubex subsidiaries, both in the road construction operations and in the road rehabilitation and maintenance operations, which include the supply of asphalt and bitumen to the market.
The subsidiaries affected by the low level of demand had been rightsized and capacity had been reduced, the company noted.
Raubex’s earnings have been supported by the materials division, which contributed 54.5% of its total operating profit in 2017/18. This division experienced stable operating conditions during the current financial year, buoyed by its diversified operations, including material handling services to the mining sector and commercial aggregate supply.
The infrastructure division has also experienced favourable conditions in the affordable housing sector throughout the financial year. Raubex said that the division was well positioned to benefit from the roll out of work related to the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) in which a number of contracts were being negotiated. Three REIPPPP contracts, to the total value of R621-million, had been secured during the year and work started on these projects during the second half of the financial year.
Notwithstanding the challenging conditions being faced by the South African construction industry, Raubex said that it had maintained a strong balance sheet throughout the year and that it was well positioned to participate in any future opportunities in the sector should conditions begin to improve.