Western Cape Business News

Send  Share  RSS  Twitter  25 Aug 2011

ENGINEERING: Racec Stays On Track


Recent Western Cape Business News

CAPE TOWN-based rail and electrical engineering specialists Racec is still steaming along the comeback trail.

After finishing the year to end September 2010 strongly with R13.6 million at bottom line, Racec managed a sound R3.1 million at bottom line in the first half of the new financial year.

Despite slightly lower turnover of R150 million, the interim performance to end March 2011 showed a vast improvement on the corresponding period last year when a R2 million loss was generated.

The divisional breakdown shows it is Racec’s Rail division that hit the profit track with a vengeance, churning good profits of almost R18 million.

This performance was, however, offset by a loss of R14.5 million from Electrical Services.

It was an interesting switch in fortunes as the Rail division’s turnover grew (year-on-year) from R63 million to R91 million, while the electrical division saw its revenue plummet from R104 million to under R70 million.

In the previous financial period Racec Electrical was assisted by large reticulation projects in the Western Cape - R95 million N1 street lighting project for the Department of Transport and Public Works and the R80 million sub-contact for the Civil and Electrical Upgrade at the Cape Town Container Terminal.

CEO Gary Harrod reports that the confirmed order book for Racec’s Rail division looks “extremely positive” with the local rail sector showing positive signs of recovery.

Harrod notes Racec Rail has successfully expanded its operations into Africa and is delivering contracts in Sierra Leone and Mozambique.

He says the Rail division will consolidate operations in these countries, but is also well positioned to catch additional business in Ghana, Tanzania, Liberia, Kenya and Malawi. Harrod says the Electrical services division endured a “hugely competitive environment” as supply continued to outstrip demand. Margins are being placed under significant pressure.

But Harrod remains hopeful, pointing out that Racec Electrical is working on a number of potential projects in renewable energy – including wind farms, solar farms and large infrastructure projects.

He believes the Rail division’s successes in Africa could see the Electrical division also looking outside SA for new opportunities.

Harrod says Racec Electrical could also look at joint ventures and acquisitions to bolster local market share.

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