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Raubex is like a box of chocolates

Raubex (JSE: RBX) caught my eye this week after releasing interim results for the six months to August 2026. With a market cap of over R8 billion and a Price/Earnings multiple of 7.2x, Raubex is typical of JSE mid-caps.

The dividend has been an important component of returns. The company currently trades on a yield of 4.6%. The total return over the past year is 10.4%, so there’s a fairly even mix of price appreciation and cash dividends behind that number.

The reason why I’m bringing you a more detailed look at Raubex has nothing to do with any of the aforementioned metrics.

We are here because you’ll struggle to find a better example of a diversified company that has such wild moves at divisional level. You literally just don’t know what you’re going to find when you look deeper.

An unusual shape

The interim results reflect revenue growth of 11.8% and operating profit growth of just 2.5%. This is why group operating margin contracted from 5.6% to 5.1%.

That’s not a great start to any income statement.

It gets worse on the net finance costs line, where a jump of 157% is attributable to various factors including the unwinding of the discount on the rehabilitation provisions.

Profit before tax was down by 3.9%. But once the adjustments are made for headline earnings, HEPS came in 4.4% higher.

The percentages are all over the place and the dividend is no better, up by 8.6% – nearly double the growth rate in HEPS!

The unusual shape of the group income statement still doesn’t fully prepare you for some of the numbers you’re about to see at divisional level.

Before we get to that, the number that management would like you to remember is undoubtedly the order book, up by 24% and giving the company an opportunity to chase proper revenue growth in the near future.

Another number that I’m sure management enjoyed is cash generated from operations before finance charges and taxation, which more than doubled in this period.

Other relevant cash and balance sheet movements included a 24.1% increase in capex and a 12.4% decrease in borrowings. Remember that the borrowings balance is always a snapshot view, rather than an indication of average borrowings over the period. This is one of the reasons why you can see a deviation between the level of borrowings and the net finance costs.

The divisions are more interesting

In Materials Handling and Mining, we find the first example of an extreme deviation between revenue and profits.

Although revenue was up by 27%, the operating result swung from profit of R87.7 million to a loss of R111.1 million! Incredibly, the operating margin has moved from positive 4.9% to negative 4.9%.

Bauba Resources is largely to blame here, along with the impact of higher input costs due to geopolitical disruptions. My view is that Bauba should never have been added to the Raubex group, as I just cannot see the strategic fit of a PGM and chrome business in a group that is mainly known for construction.

Raubex has been saying for a while that the company might sell Bauba. There’s no certainty of a deal taking place and the loss of R192.7 million in the latest period isn’t exactly filling me with confidence that we are about to see a transaction announcement.

Materials Handling and Mining also features commentary on a contract linked to the diamond market. You can decide for yourself if this sounds like it is grounded in the realities of the diamond trend:

“Namdeb remains B&E International’s flagship contract and delivered an exceptional performance throughout the period. Although global diamond prices remained under pressure, partly due to the growing popularity of lab-grown alternatives, demand for Namdeb’s natural diamonds remained resilient, supported by the consistently high quality of its product offering.”

I understand the incentive to downplay the risk here, which is exactly why I think this wording is too soft. I struggle to see how natural diamonds will stage a comeback, but perhaps I’ll be wrong.

Moving on to Construction Materials, we find revenue growth of 24.8% and an operating profit decline of 15.6% to R120.1 million. The aggregates sector hurt them here, as did weaker volumes in an environment of uncertainty around South African smelters.

If you’ve been following Afrimat (JSE: AFT), this is a narrative that will be familiar to you!

The Roads and Earthworks division at least moved in the right direction in terms of profitability, up by 0.8% to R289.9 million. That’s an important performance given the size of this division, but it somehow still feels disappointing when revenue growth was 19.5%.

To be fair, the operating profit margin of 6.8% (down from 8.1%) is now in the target range of 6% to 7%, so this movement seems to be a correction from an unsustainably strong base period.

There were some encouraging SANRAL contracts awarded to the division during this period, with the group commenting that “road infrastructure spending is beginning to gain momentum.”

On behalf of all South Africans using our roads, I hope the company is right!

The Infrastructure division saw revenue decline by 16% and operating profit fall by 3.4% to R173.9 million. Although operating profit moved in the wrong direction, there was an increase in margin from 8.4% to 9.6%.

This division handles a wide variety of projects, ranging from wind and solar through to residential and water treatment plants. The repair and upgrade of the Parliament buildings in Cape Town will also be an important project over a 20-month period.

Finally, we get to the star of the show at operating profit level: the Australian operations. I’ll give you a moment to recover from the shock of a South African company performing well in Aus!

Before you think that the world has gone completely mad, it’s worth pointing out that the operating loss in the prior period was R94.8 million. See? Australia is still tough.

The swing to profits of R145.1 million in this period is an incredibly well-timed move that has offset much of the pain in South Africa, but it’s also a reminder of how volatile the business is.

Revenue growth was only 0.5% in Australia, so the large shift in profitability happened well below the revenue line. This is because there were no loss-making projects in this period.

The nature of the construction industry and the way that pricing works is that you can be stuck in a terribly painful project for a long time. There’s very little room for error when putting the pricing together and then executing on contracts, which is exactly why this is an industry that goes well beyond my personal risk tolerance.

Diversification – and some diworsification

When you see how volatile the divisional numbers can be, it makes more sense that Raubex has its finger in many pies. Can you imagine trying to pick just one or two winners from these divisions?

The problem is that it makes it harder to attribute a particular theme to the company.

Is it mining?

Is it infrastructure spending?

Is it broader construction?

In practice, it’s a bit of everything really. This could justify Raubex being thought of as a play on the “real economy” and the broader levels of fixed asset activity, but it’s still not that simple thanks to the ever-present risk of loss-making contracts.

And then there’s Bauba Resources of course, a business that just makes no sense in this group. I really hope they will get rid of it sooner than later.