Raubex’s 1H25 performance was commendable, but missed expectations due to setbacks faced at Bauba. As a result, it was not able to take advantage of the favourable chrome price and USD/ZAR exchange rate. Instead of realising a double-digit margin uplift, Bauba’s margin plummeted, dragging earnings down with it.
Were it not for standout performances from the Construction Materials and Roads and Earthworks segments, earnings would have remained flat. The two segments achieved double-digit revenue growth and expanded margins. This was driven by robust order books and improved project execution. While the Infrastructure segment did not improve margins, increased activity in the renewable energy sector, which drove revenue growth, is promising. Raubex continues to gain traction with private IPPs in SA and Australia, and this should continue to drive growth in 2H25.
The growth in renewables should be supported by improved activity in the construction sector, driven by Transnet and Sanral. Demand for ballast by Transnet continues to rise, signalling improved activity in future, and Sanral needs to award c. R30bn worth of projects by the end of March 2025. Increased demand for contract crushing services could boost profitability.
However, while the prospects for Raubex are compelling on paper, Transnet and Sanral have been inefficient is the recent past. Project awards could likely be delayed, thereby not contributing to FY25 results – take for example the border post projects, which were meant to be awarded in March 2024. While we believe that Raubex will have a solid FY25, we do not expect it to reach its full potential just yet. The weaker chrome market should weigh on profitability and the ‘slow to action’ SOEs will likely hold back growth as Raubex heads into the December-January construction break.