Adelaide Brighton Restarts DRP After Mixed Result

South Australian based cement and concrete maker Adelaide Brighton (ABC) has maintained its interim dividend at 7.5c a share fully franked for the six months to June after reporting a very mixed set of figures.

The decision to maintain dividend came as the company released its first half profit, and reactivated its dividend reinvestment program which was suspended in 2010.

Adelaide and Brighton must have a need for help from shareholders because they are offering a 2.5% discount on the DRP to daily volume weighted average price of shares traded on the ASX (as determined by the board) over the period from Monday 22 September 2014 to Friday 3 October 2014.

That need for cash showed up in yesterday’s report – cashflow from operations fell 71% to $25.8 million, interest cover on debt fell to a still solid 10.9 times earnings before interest and tax from a even more solid 16.6 times, and debt to equity ratio rose to 32.1% in the half from 30.8%.

The company, which is based in Adelaide, reported lower than expected half-year earnings, despite showing record first-half revenue supported by strength in the housing market.

Net profit after tax for the six months to June 30 dropped nearly 16% to $51.2 million, missing the company’s own guidance.

That was on a 3.9% rise in revenue to a record $602 million, and a 7% rise in earnings before interest and tax (EBIT) to $78.3 million. And, after stripping out a number of significant items, underlying net profit fell 2.9% to $61.2 million.

A number of one-off restructuring and transaction costs contributed to the declines, but the company said these costs associated with restructuring parts of its cement operations and corporate functions were expected to contribute to significant savings in future years.

ABC 1Y – Adelaide Brighton sees 16% profit dip

CEO Martin Brydon said $112 million had been invested in improving efficiency and environmental performance in the cement and lime business.

Pre-tax cost savings of around $8 million are expected in the current calendar year, followed by pre-tax cost savings of around $11 million in calendar year 2015 (which is the company’s financial year).

“Demand for cement and clinker in 2014 is expected to be similar to 2013. Projects in Western Australia and the Northern Territory and a residential recovery are anticipated to offset weakness in the non-residential sector and a decline in infrastructure and health activity in South Australia," Mr Brydon said in yesterday’s statement.

“Lime sales volumes for 2014 are likely to be down by around 5% on last year although average prices are expected to improve due to long term contract renewal.

“Further land sales over the next three years are expected to deliver significant cash flow and profit, some of which could assist earnings in the next 6 to 12 months.

“Adelaide Brighton expects 2014 full year underlying net profit after tax will be in the range of $153 million to $163 million and anticipate that the total 2014 ordinary dividend will be maintained at 16.5 cents fully franked,” said Mr Brydon.

Many of these costs and savings were forecast at the company’s 2013 AGM earlier this year.

The relatively weak result compares to the very solid set of numbers released on Wednesday by the much bigger Boral (which has cement interests among a much wider spread of businesses).

The company’s shares rose 0.5% to $3.65.

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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