ENGINEERING: Racec Lays Profitable Line
Recent Western Cape Business News
RE-FOCUSSED rail engineering firm Racec appears to be steaming ahead with interim revenues up 58% to R128 million in the six months to end March 2012.
Profit for the period from the core rail business (remember the company has recently sold off its loss making electrification operations) was up by a third to around R10 million. And there’s more to come…
CEO Gary Harrod believed the positive results were just the start. “We are hugely optimistic and excited about the future. Our determined commitment to being a rail focused entity is paying dividends.”
He said while the interim period saw Racec working hard at reducing overall fixed costs, the company also managed to significantly grow its 2012 order book significantly. “Even more encouraging is that we are anticipating a further improvement on our gross margin percentage, which obviously bodes well for the remainder of 2012 and beyond.”
Harrod said Racec’s current challenge was to build sufficient capacity to deliver the rail opportunities in the medium-to long-term without unnecessarily increasing fixed overhead cost.
Harrod said Racec had rationalised its overhead structure to accommodate core functions by forming various outsourced and alliance relationships with both service providers and clients.
“We believe this will help us to more effectively scale our capacity to deliver in response to industry demands.”
One of the highlights for Racec in the interim period was a recent award of the total upgrading of a further 71 kilometres of track in Sierra Leone as well as several contract awards in SA (which Harrod expects to significantly impact Racec’s 2012 and 2013 results).
He added that Racec’s strategy to secure annuity type contracts off the back of its initial construction works was also proving successful.
Harrod confirmed Racec is also continuing its expansion strategy into the resource rich Africa by focusing on mining houses and other large infrastructure contractors.
He said other ‘imminent’ opportunities existed in Mozambique, Sierra Leone, Swaziland, Ghana, Liberia, Congo, Malawi and Kenya. The Cape-based company has already set up a permanent regional presence in Mozambique and Sierra Leone.
Locally things are also looking up with Transnet set to splurge on its infrastructure. Harrod said delivery in the local market remained steady, but that the company anticipated the full effects of the government’s infrastructure commitment would be more seriously witnessed in the next six to 18 months.
“We are therefore confident…that we are extremely well positioned to participate in the anticipated rail infrastructure roll out.”
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