Raubex (RBX) – Unlocking margin potential

Raubex’s 1H24 performance was commendable, and in many ways it has replaced the lucrative Beitbridge project. The strong performance was due to improvements across the board, with particularly solid results from Bauba and Australia. Growth in the Construction Materials segment was off a low base but shows signs of improvement in the construction market, and although Roads and Earthworks revenue declined in the period, ‘non-Beitbridge’ revenue rose, with improved project execution increasing margins.

 

The ramp up at Bauba bore fruit during the period, increasing volumes to the steady state of 80ktpm, with management in no rush to increase volumes while it optimises its new beneficiation plant. Raubex expects significant margin upside from the sale of chrome concentrate, but this will depend on the yield achieved.

 

Raubex continues to establish a reputation in Australia, slowly increasing road maintenance and, more recently, renewable energy projects. However, while its Australian renewables business is on the rise, the SA renewables business continues to struggle. For many reasons, including wheeling agreement issues and IPPs unable to reach financial close, Raubex has not won any major projects in SA and the division continues to underperform.

 

It has explored opportunities in the mining industry, picking up small renewables projects but gaining interest in its roads and infrastructure services. This ties in with Raubex’s strategy to reduce its exposure to Sanral, increase its margins and become more selective, reducing its risk. Sanral will, however, always be a client and Raubex has a large interest in the resubmitted projects and border post projects that are expected to close in March next year. The outlook for Raubex is positive, with potential for outperformance if Bauba’s full OPM can be unlocked.