Raubex disappointed to lose Sanral contract to Chinese JV

JSE-listed construction group Raubex is disappointed to have lost the R1.8 billion tender to a Chinese joint venture company to upgrade the Ashburton Exchange in KwaZulu-Natal.

However, Felicia Msiza, CEO of Raubex, said Monday she doubts Chinese companies’ activities in the local market will negatively impact Raubex’s order book and financial performance in the future.

She said that of the four tenders awarded by the South African National Roads Agency (Sanral) last week, Raubex had only submitted one bid for the Ashburton replacement project.

“Obviously we are disappointed not to have won the tender, but we believe the DBSA [Development Bank of Southern Africa] has followed the supply chain management processes in relation to the award and it appears that it was awarded on the basis of lowest price,” added Msiza.

She said it is positive to see that Sanral is now awarding tenders and that Raubex looks forward to more awards from Sanral.


Asked if these Chinese contractors will impact Raubex’s order book going forward, she says: “…we have always delivered quality, budget and timeliness in relation to our work with Sanral and believe in our experience, current track record and the capacity we put ourselves in a better position [than other contractors] in relation to other orders to be awarded by Sanral.”

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Raubex said in May this year the group was in the running for Sanral projects worth between R8 billion and R10 billion.

Msiza said on Monday that Sanral accounted for 32%, or R5.29 billion, of Raubex’s total backlog of R16.4 billion at the end of August, compared with 39%, or R6.68 billion, at the end of December 2021.

She said that a number of project awards are still expected from Sanral.

Chinese companies received the bulk of the bids last week sanral Tenders for four major projects. The Ashburton exchange project was awarded to Base Major/China State Construction Engineering Corporation (CSCEC). Base Major, founded by Chinese businessman Stephen J Lu, was registered in South Africa in 2007.

Msiza said Raubex is still happy with the group’s current solid order book of R16.4 billion but stressed the need to continually replenish it as the group is “actually working through R50 million a day”.

“There has been a high level of bidding activity which has continued throughout the year to date. There are a number of projects that have yet to be decided and that could significantly increase the order book if awarded [to Raubex].”

The international division of Raubex increased its share of the group’s total backlog from 24% at the end of December to 34% at the end of August.

Two new major orders

This increase is due to the award of two major contracts in Africa – the R1.2 billion Namdeb project in Namibia and the R2.4 billion Sequi River Bridge project in Lesotho, where Raubex is a 21 percent joint venture partner.

“If you look at the growth of our order book over the last five years, you will see that the size of the group has actually doubled,” Msiza said.

“Our teams are energetic to deliver our R16.4 billion order book as well as leverage our healthy balance sheet and take advantage of various growth opportunities that are available to us.”

Beitbridge Border Post

Raubex’s flagship project, and the largest single contract awarded to the company to date, is the R2.5 billion EPC (Engineering, Procurement and Construction) contract for the modernization of Beitbridge Border Post in Zimbabwe.

Upon completion, Raubex will have a 17-year maintenance contract worth R1.7 billion.

Raubex chief operating officer Dirk Lourens said Monday the border post portion of the Beitbridge project is due to be completed by the end of November and the entire project by April 2023.

Lourens said Raubex has yet to see the government’s infrastructure-building program “go live”.

“We think there’s a lot of that in the pipeline, and we’ll definitely be reviewing it strategically in terms of margin and risk.” We are ready to implement once this infrastructure measure is fully rolled out by the government,” he said.

Raubex is pursuing further border post projects in South Africa and its neighboring countries, as well as renewable energy projects.

Interior Minister Dr. Aaron Motsoaledi said in June his department plans to issue a public call for proposals “in a few months” for a R6 billion project to completely overhaul and rebuild South Africa’s six busiest border posts.

Lourens said the feedback Raubex is getting from South Africa and its neighboring countries on border post projects is that these public-private partnerships (PPPs) will soon be put out to tender.

Renewable energy

The commercial closure of the Reippp (Renewable Energy Independent Power Producer Procurement) program window 5 – which includes 25 projects totaling 1,600 MW – has been further delayed as the preferred bidders were only announced about a week ago.

Msiza said the group’s infrastructure division is well positioned to benefit from private sector and government efforts to increase power generation capacity.

Lourens said Raubex has experienced increased activity and demand in the private renewable energy sector and has shifted its focus to that market due to the delay in awarding Bid Window 5 projects.

intermediate results

Msiza said that in the six months to the end of August 2022, Raubex posted the best first-half results in the group’s history.

Raubex on Monday reported a 23.2% increase in sales to R7.38 billion from R5.99 billion in the same period last year.

Operating profit improved by 26.4% from R435.2 million to R550.3 million.

Total earnings per share rose 16.1% to 159 cents from 137 cents.

An interim dividend per share of 53 cents was declared, up 12.8% from the 47 cents declared in the previous period.

Analyst Commentary

Peregrine Capital CEO David Fraser said Raubex delivered solid results that show the benefits of a diversified earnings base.

However, he said that Raubex will need to find replacement work for the Beitbridge border post contract going forward, noting that margin contribution means that contract is more important to Raubex than revenue.

“If you look at the international margin, it’s 25%. Most of it is the Beitbridge border post contract. You need to replace that operating profit instead of sales, and it may take double or even triple that sales to achieve that operating profit. That will be the challenge for the future.”

This article originally appeared on Moneyweb and has been republished with permission.
Read the original article here.

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