Housing Downturn Cracks Adelaide Brighton

Here’s another trading update with bad news (AKA a confession) and a plunging share price as a result.

Just as we saw with CSR earlier this week and other suppliers to the building sector (such as Brickworks’ core brick-making operations) and Fletcher Building products which is looking to revamp its Australian operations in the face of weakening demand, cement maker, Adelaide Brighton is now feeling similar financial pain.

So much so that it issued a trading update just four months into its 2019 financial year (it balances on December 31) warning that profits for the year could be up to 15% per lower than 2018’s $191 million because of weaker demand in residential construction and fierce competition from imports.

Shares in Australia’s biggest cement company slumped 10.6% to $3.76 yesterday. They are down more than 42% over the past year (including a high of $6.94 in July). The shares are off more than 14% in the last five trading days alone.

“The primary drivers for the decline in expected earnings include further softening of demand for construction materials in the residential market, increased competition from cement imports, increased competitive pressures in Queensland and higher costs of key raw materials compared to the prior year.”

New CEO, Nick Miller said in the statement, “While market conditions are expected to impact current year earnings, our balance sheet is strong and provides us with the flexibility to pursue new opportunities that arise in challenging market conditions. We will continue to focus on operational improvement and cost efficiency to mitigate the impact on earnings.”

That means cost cuts ahead.

The profit warning underlines the difficult conditions for building products companies as the slump in residential construction gathers pace – especially in the apartments, home unit, and townhouse sectors.

The warning came a day before the company holds its annual general meeting in Adelaide on Friday.

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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