Slow Construction Demand Hits Adbri Bottom Line

But for cement group Adelaide Brighton (ABC) weakness in the construction sector meant bad news for shareholders at yesterday’s AGM.

The company warned that the subdued outlook for the building sector will be a drag on earnings in 2013, with the key Victorian market’s sluggishness a major reason for the poor outlook.

As a result, the company is expecting a fall in earnings for the six months to June.

For the full year, the outlook is for a profit decline or, at best, a profit in-line with 2012.

It earned a net profit of $154.1 million, up nearly 4% from the $148.4 million in 2011.

The company said at the time of the 2012 profit release in February, that it was expecting a slow recovery in the construction sector and demand for cement.

That clearly hasn’t happened and sales of both cement and clinker, an intermediate product in the production of cement, will be lower in 2013.

Seeing the company lifted revenue 7% in 2012 to $1.176 billion from $1.100 billion in 2011, the chances of a new record being set in 2013 looks remote.

Even though demand is expected to remain firm in Western Australia and South Australia, along with the Northern Territory, it will not be sufficient to offset ongoing weakness in the broader construction market.

In the Victorian and Queensland markets, the ongoing weak demand will weigh on the earnings of associates, shareholders were told.

The weakness in Victoria will weigh on the benefits anticipated from the recent upgrade to its Birkenhead cement mill.

The shares closed at $3.45 yesterday, steady on the day. They were trading at $3.35 at the time of the 2012 profit release in February.

ABC YTD – Slow construction demand hits Adbri bottom line

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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