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JOHANNESBURG – The continued economic downturn in South Africa, almost translating into a moratorium on local construction projects, has hit Raubex hard, with the company expecting its annual earnings to drop 80 percent, leading the JSE-listed group to further downsize its operations.

In a further trading statement for the year ended February 28, Raubex said yesterday that it expected its earnings per share (EPS) to be between 85 and 95 percent lower than the earnings per share from 2018, while headline earnings per share (Heps) were expected to be between 70 and 80 percent lower. This translates to EPS of between 11.7 cents and 35c compared with 233.5c in 2018 and Heps of between 45.7c and 68.6c compared with 228.6c at the same time in 2018.

“The company has continued to experience weak trading conditions in the South African construction industry during the second half of the financial year, particularly in the road construction sector. This has negatively impacted Raubex subsidiaries both in the road construction operations and in the road rehabilitation and maintenance operations, which includes the supply of asphalt and bitumen to the market,” it reported.

It said right-sizing initiatives had continued during the second half of the financial year to further reduce capacity in line with the current low level of demand being experienced.

The group's books suffered from two incidents, which adversely impacted on earnings. Raubex is owed R116.7 million before tax (R75.9m after tax) by the Road Development Agency in Zambia in relation to outstanding debt for the two Link 8000 road contracts, which have been suspended, pending the resolution of the current funding impasse. 

It also has a goodwill impairment charge of R51.5m before and after tax attributable to the asphalt cash generating unit in the road surfacing and rehabilitation division, which is primarily dependent on the South African road construction sector. 

The projects would have seen it realise EPS and Heps of between 55 and 65 percent lower than the previous corresponding period. This would have translated to EPS of between 81.7c and 105.1c compared with 233.5c in 2018, and Heps of between 80c and 102.9c, compared with 228.6c in 2018.

The group last year closed down the operations of Strata Civils, which specialises in small-scale civil infrastructure projects, particularly in urban environments in the Western and Eastern Cape as well as L&R Civils, a company acquired in July 2012, in anticipation of the much-needed roll-out of water infrastructure projects in the country.

Despite this, the group maintained positive cash flows from operating activities and expects to declare a final dividend per share of between 15c and 23c compared to 33c in 2018.

Raubex was optimistic that its fortunes were turning for the infrastructure division in the affordable housing sector, in which a number of contracts were being negotiated, four of which had now been secured totalling R729m.

Raubex shares closed 0.60 percent lower at R20 on the JSE on Monday.