Raubex engages Sanral about its role in contracts collusion

Raubex is continuing to engage with the SA National Roads Agency Limited (Sanral) about its involvement in collusion on eight contracts and a road contractors meeting that resulted in it paying a R58.8 million fine in terms of the Competition Commission’s fast-track settlement process. However, Rudolf Fourie, the chief executive of the listed road construction and rehabilitation company, said yesterday that Sanral had not indicated if it intended to lodge a civil damages claims against Raubex. “We have been talking to them and told them what happened and how it happened. Raubex was only exposed to Sanral but they have to prove damages,” Fourie said.

“The profits Raubex made on these contracts were far less than the fine. We’re trying to prove to them [Sanral] we did not make any super profits. The profit [margin] on those jobs was 6 percent. I think Sanral is still looking at all its option but has not indicated what way it is going at this stage.” Fourie added that Raubex had luckily not seen any impact yet of the collusion on the way Sanral issued and awarded tenders, with Sanral last week awarding Raubex a R450m contract for the road between Thaba Nchu and Bloemfontein. The eight contracts that formed part of Raubex’s settlement agreement with the commission related to cover pricing. This involves creating the illusion of competition by some companies submitting non-competitive bids to enable a fellow conspirator to win a tender.

Agreement was reached between Raubex, Basil Read, Concor, Haw Inglis, Grinaker-LTA and Wilson Bayly Holmes-Ovcon at the 2006 road contractors meeting on the allocation of tenders for the construction of roads and the submission of non-competitive bids by firms not interested in winning a specific contract. Strong performances by Raubex’s materials handling operations and Raubex Infra, the new division focused on renewable energy, housing, telecommunications, rail and pipeline construction projects, boosted the group’s financial performance in the six months to August. Headline earnings a share increased by 0.6 percent year on year to 96.3c. Revenue rose by almost 15 percent to R3.22 billion. Operating profit declined by 5.6 percent to R274.5m while cash flow from operations slumped by almost 19 percent to R357.6m.

Fourie said this was largely attributable to the payment of the commission fine and the increased working capital requirements of the acquisition of bituminous products manufacturer and distributor Tosas. An interim dividend of 30c a share was declared, which was 16 percent lower than the 35c declared for the previous corresponding period. The group’s secured order book increased to R6.2bn from R5bn. Fourie said the new Raubex Infra division had taken its order book close to R1bn in the past nine months and he hoped to increase its revenue to R1bn in the next financial year. He said Raubex aimed to ultimately increase the new division’s contribution to group revenue to 15 percent from about 10 percent currently.

Fourie said the division had settled into the industry and had a solid reputation and would like to build it organically. He added prospects were better internationally than in South Africa and Raubex planned to grow its international operations. But Fourie stressed Raubex wanted better margins because of the greater risk outside South Africa and would not be chasing order book in its international operations but margin. The group’s international operations contribute about 15 percent to Raubex’s total revenue. He believed it could grow this. The shares fell 3.47 percent to R23.65 on the JSE yesterday.