The market loved Boral’s profit announcement yesterday, sending the shares 9% higher at one stage.
Boral, a building products supplier here and in Asia and in the US (which has been a millstone) reported a 36% in first-half net profit, and said full year profit should be higher by at least 20% on the 2009-10 result.
Boral shares rose as much as 33 cents, or 7% in early trading to $5.05, and then bounced further, hitting a day’s high of $5.17, the highest since May of last year, before easing to close at $5.14, for a gain of 42c or 8.9% on the day.
Boral reported that net profit for the half year to December 31 hit $92.3 million, up from $67.9 million in the six months to December 2009.
Interim dividend was raised, not by much, from 7c a share to 7.5c.
Revenue in the period was $2.3881 billion, up 2.5% from $2.3296 billion in the prior first half.
Boral said earnings before interest, tax, depreciation and amortisation were $269 million, up 4% on the prior first half.
What got the market excited it seems was Boral’s expectation that it will achieve net profit for the full year between $160 million and $175 million, with the low end of this range representing a 20% increase on underlying net profit in the prior year.
And driving that hope is the rebuilding of the flood and storm damage in Queensland, which would be one of Boral’s major areas of business.
"The fundamental rebuild of Queensland and its infrastructure could have a favourable impact on the second half of the year," Boral said in yesterday’s statement.
In commentary, Boral said construction materials, its largest division, had a ‘‘difficult and mixed first-half to the year’’.
"Western Australia, South Australia and Victoria all performed strongly, while NSW and Queensland were rain-impacted for much of the second quarter."
The Queensland market would be the largest variable to the company’s outlook in 2011.
The company said operations were up and running once more and mobile equipment was being moved to Queensland in anticipation of strong demand in the final quarter of 2010-11.
"Performance in January 2011 has been significantly impacted by delays to site access and continued weather, but beyond this we are ideally placed to support Queensland’s massive clean up and rebuild program which is expected to last for years ahead,’’ Boral said.
"The Group’s first half results, while impacted by second quarter rains down the east coast of Australia, reflected early signs of the benefits from our operational and sales improvement activities.
"Conditions make it impossible to accurately predict the outcome for the balance of this year.
"The fundamental rebuild of Queensland and its infrastructure could have a favourable impact on the second half of the year.
"Weather permitting, underlying markets in general are expected to be reasonably flat when compared to last year.
"In Construction Materials we expect improved trading due to strong order books and a catch up on project work which was weather delayed in the first half of the year. Pricing is expected to improve but its effect will be less immediate due to existing commitments on delayed projects.
"Queensland’s rebuild programme could have a favourable effect on this year’s profits with difficult conditions impacting January and now February 2011 followed up with much higher demand for the balance of the financial year.
"Building Products division is expected to experience slower residential new build activity in Australia, offset in part by improvements in refit together with continuing growth in Asia.
"Queensland’s rebuild could have a positive influence on the final quarter of FY2011.
In Cement, following our scheduled shut-down at Waurn Ponds, we expect improved production volumes and the continued strong market demands in Indonesia and Thailand to deliver an improved performance in the current year.
The US market is expected to remain broadly similar in the early part of calendar year 2011 before seeing modest improvement in the second quarter. Some early signs of improved US fundamentals are a positive against the background of disappointing housing starts," the company said.
Boral chief executive Mark Selway said it was a pleasing result in light of the weather related difficulties in the first-half.
“I am pleased with the Group’s progress especially in light of the weather related difficulties we faced during the first half of FY2011. I attribute much of the progress to actions taken by Boral employees globally to improve the productivity of our operations and increase our focus on those activities where the Group sees opportunities to build competitive advantage."
