Raubex earnings slip as Australian loss offsets SA infrastructure gains

Key topics:

• SA divisions post double-digit growth despite Group earnings dip

• Australian project termination leads to R210m loss

• Record R30.4bn order book supports positive outlook

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BizNews Reporter

Raubex Group Limited, a key South African infrastructure development and construction materials supply entity, reported a decline in overall performance for the six months ended August 31, 2025 (1H2026), compared to the prior period. Despite these financial headwinds, the Group remains confident in its future growth, anchored by a robust, growing order book of R30.44 billion, an 8.0% increase since the financial year-end.

The financial headwinds

The Group's top-line revenue saw only a marginal decrease of 1.0% to R10.84 billion (1H2025: R10.95 billion). However, profitability was significantly impacted:

• Operating profit dropped sharply by 28.7% to R603.0 million (1H2025: R846.2 million).

• The Group operating margin subsequently came under pressure, reducing to 5.6% from 7.7% in the prior period.

• This decline flowed through to earnings, with Headline Earnings Per Share (HEPS) decreasing by 14.4% to 243.5 cents (1H2025: 284.3 cents).

• The interim dividend also decreased by 13.8% to 81 cents per share.

• Cash generation was notably weaker, as cash generated from operations decreased by 50.5% to R762.4 million.

• The cash and cash equivalents balance decreased by 26.5% to R1.56 billion.

The primary drag: Australia Division

The main contributor to the reduced group operating margin was the performance of the newly segmented Australia Division. This segment reported an operating loss of R94.8 million for the period, a stark 159.9% reduction from the R158.3 million operating profit recorded in 1H2025.

The massive operating loss resulted primarily from a single project in Western Australia: Raubex Construction Australia’s largest active contract was terminated for convenience, leading to expected losses of R210.0 million being accounted for during 1H2026.

The Materials Handling and Mining Division also faced significant challenges, seeing its operating profit decrease by 50.7%. This was largely due to the underperformance of Bauba’s mining operations, which incurred an operating loss of R7.6 million (1H2025: R114.8 million profit).

Core strengths and growth drivers

Despite overall financial declines, Raubex’s South African core operations demonstrated robust growth, a testament to the Group's diversification strategy.

The Roads and Earthworks Division delivered exceptional results, driven by effective project execution and increased margins:

• Revenue increased by 2.3% to R3.57 billion.

• Operating profit increased by 11.8% to R287.6 million.

• The operating profit margin strengthened to 8.1%, exceeding the target range of 6% to 7%.

• The division secured a strong pipeline, including major SANRAL contracts valued at R3.22 billion and R2.36 billion, replacing completed work.

The Infrastructure Division was the standout performer, achieving significant growth predominantly through new contracts in South Africa:

• Revenue surged by 49.0% to R2.15 billion.

• Operating profit more than doubled, increasing by 110.6% to R180.1 million.

• This performance was bolstered by solid returns from renewable energy projects, including a R2.4 billion cluster of three wind farms.

Outlook and strategic moves

Management maintains a positive outlook for the remainder of FY2026. Strategic acquisitions and internal improvements are key to this confidence:

• In Australia, the outlook is now "cautiously optimistic," supported by the acquisition of Axis Mineral Services (a contract crushing business) which is expected to contribute positively to full-year results.

• The Materials Handling and Mining Division anticipates increased profitability from the new PGM plant successfully commissioned at Kookfontein in August 2025.

• The Roads and Earthworks Division has been named the preferred bidder for the Lebombo Border Post project, aligning with the government's initiative to overhaul six major border posts.

• Strong market momentum in the private renewable energy sector provides a strong impetus for the Infrastructure Division.

The Group’s substantial and growing order book underscores its potential to capitalise on infrastructure opportunities both organically and through acquisitions.