Adelaide Brighton Confirms Hit From Construction Slump

Like Caltex’s big earnings fall reported on Tuesday, the half-year earnings report yesterday from Adelaide and Brighton (AdBri) and its loss had been well telegraphed by earlier trading and earnings downgrades.

Caltex’s warning was in June, and AdBri’s was a month ago. Yesterday’s report contained no extra surprises.

The AdBri share price 5 cents in early trade yesterday but recovered to close up 0.9% at $3.16 as investors realised there was no more bad news in the interim report.

AdBri reported a 6.3% drop in interim revenue to $755.7 million and a net loss of $17.9 million compared to a net profit of $84.5 million in June half of 2018.

The company has blamed the weak construction sectors – such as housing (confirmed by the 11.1% slide in the value of construction work done in the year to June and 3.8% in the June quarter alone – see separate story).

The outlook isn’t great either with residential construction tipped to continue to decline until 2021. AdBri management is counting on mining and infrastructure construction to offset the weakness for its products in the near-term.

But even those sectors are seeing weaker than expected activity – the constriction work report revealed weakness in some areas of infrastructure spending and Boral’s weak outlook on Monday for the next year is also not encouraging for AdBri’s confidence

The outlook for the rest of 2019 is for more of the same so the possibility of improving revenues looks bleak at the moment while earnings will remain under pressure from tight margins and too high energy costs.

The benefits from the company’s already announced cost-cutting program also won’t be felt until next and management is forecasting 2019 full-year underlying net profit to range between $120 million and $130 million.

This compares to Adelaide Brighton’s 2018 underlying net profit of $191 million.

It looks certain that after the interim dividend was suspended, that the chances of a final being paid next February look remote.

CEO Nick Miller was upbeat in yesterday’s statement:

“In the context of prevailing market conditions, we have taken decisive steps in order to maintain flexibility to pursue reinvestment and growth opportunities while actively implementing cost reduction and operational improvement initiatives.

“Adelaide Brighton is a durable business with strong share in its key markets. While we expect demand conditions to remain soft in the near term, the Company is well placed to weather the cycle and maintain and grow our strong market position.”

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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