No worries about the slowing housing sector for the country’s biggest cement maker, Adelaide Brighton.
It seems three years of solid growth ahead of it as rising demand from infrastructure spending takes over from housing,
Despite that upbeat outlook at yesterday’s annual meeting in Adelaide, the company’s shares eased 1% yesterday after shareholders were warned to expect a weaker first half result, but a stronger second six months to give the company a strong finish to 2017-18.
The shares fell six cents to $5.61 as shareholders were also told there are at least three years of strong demand ahead for its products on the east coast, even if house prices ease.
Chairman, Les Hosking told the meeting that even if residential housing prices did start to fall, it would have little impact on the construction market in the short term.
"It’s not immediate," Mr Hosking said. "There are plenty of housing sites being developed now where construction hasn’t even started."
He pointed to the Badgerys Creek region in outer Sydney as a particular hot spot, where demand would be very robust in new housing construction. That’s where Sydney’s second airport will be built.
Mr Hosking said the company expects profits in the first half of calendar 2017 to be below the same time last year, because of one-off restructuring costs and the relocation of a North Melbourne plant, even though sales volumes will be higher.
But it expects profits in the second half of 2017 will be stronger than the same time last year, despite electricity costs jumping by around $8 million from last year.
“However second half 2017 underlying net profit after tax is anticipated to be stronger than the second half of the prior corresponding period’’. And CEO Martin Brydon told shareholders “We look forward to a strong finish to the year.”
He said that even though housing approval figures were now slowing from high levels, there was still a strong pipeline of orders in residential construction for up to two years, and then any slack would be picked up by rising levels of infrastructure spending on roads and other big projects.
"Certainly the residential pipeline has got a year or two to run," he said. "We expect to be pretty busy in all of our products."
Mr Brydon said the infrastructure spending pipeline for federal and state governments was extremely strong and demand from that sector would offset any subsequent downturn in the residential housing sector.
Mr Hosking had earlier told the meeting“Stronger demand in South Australia and the east coast is expected to more than offset weaker markets in Western Australia and the Northern Territory.
“Sales volumes of premixed concrete, concrete products and aggregates are expected to increase this year due to infrastructure projects on the east coast and South Australia.’’
Prices were expected to increase “particularly in premixed concrete and aggregates,” he added.
