Local Sales Give Boral Concrete Result
Sydney Morning Herald
Thursday February 14, 2008
THE building materials concern Boral has defied fears that the housing slump in NSW and the US would lead to a sharp fall in its first-half earnings, reporting a surprise improvement in the profitability of its Australian operations.
Yesterday the company reported a 10 per cent fall in net profit to $132 million for the six months to December 30, 2007. The unexpectedly strong growth in earnings by its Australian construction materials business helped offset concerns that the company's profits were headed for a hard landing.At its annual meeting last October, the company tipped a 15 per cent slump in first-half profits. Given a 32 per cent drop in housing starts in the US and a continued slump in the NSW market in the half-year, Boral's managing director, Rod Pearse, said he was pleased the gross profits "were only down 14 per cent" from their peak in 2004."While it is not a great time in the housing sector, we have a great diversification of businesses," he said.The market appeared to agree, with Boral shares surging by 42c to $6.01. In the lead-up to the result, shares plunged to a four-year low of $5.41.Boral also announced plans for a $100 million buyback of its shares. "It's obviously quite low and therefore a buyback at this time is a good thing to do," Mr Pearse saidThe company said 90 per cent of its earnings were sourced from Australia, compared with 74 per cent in the previous year. The profit rise in Australia helped offset the poor contribution by Boral USA, which reported an 85 per cent profit slump. Despite the gloom in the housing market, Mr Pearse said he believed the long-term outlook was bright, given that the present level of construction was well below "underlying" demand. In further good news for investors, Boral declared its fully franked interim dividend would remain unchanged at 17c a share, payable on March 19. The better than expected result was helped by strong demand for concrete in Australia from the non-residential and infrastructure construction sectors. Price gains for building and construction materials also helped.Mr Pearse said he expected a further price increase for cement and concrete on April 1 would help. However, he remained cautious for the full year, maintaining his forecast of a 15 per cent dip in full-year profits. Mr Pearse also warned that the US - where Boral is the biggest supplier of bricks and clay roof tiles - and Australia were due for more falls in housing activity. He said he expected US housing starts to fall to 950,000 a year, well down from the annualised rate of 1.24 million starts in the first half. In Australia, the recent interest rate rises and the paucity of affordable housing would continue to drag down housing activity, he said.
© 2008 Sydney Morning Herald