Boral Confirms Earnings Hit From Construction Slowdown

By Glenn Dyer | More Articles by Glenn Dyer

As expected the weaker housing market in Australia has hit Boral with a forecast 5% fall in 2019-20 first-half earnings to about $461 million revealed yesterday.

CEO Mike Kane confirmed the expected slide in first-half EBITDA (earnings before interest, tax, depreciation, and amortisation) at the company’s AGM in Sydney yesterday.

Boral shares dipped 3.7% to $4.90 yesterday.

He also reaffirmed the company’s full-year profit forecast, released by Boral in August of a drop of 5% to 15% in net profit before one-off items from its 2018-19 result.

Mr. Kane blamed the weaker profit on“lower earnings and higher depreciation charges”.

“In Boral Australia, we saw lower earnings in the first quarter of trading, with the softer housing market in Australia and delays in infrastructure projects underpinning eight percent lower concrete volume relative to last year, and broadly flat asphalt volumes,” Mr. Kane told shareholders.

The company also experienced disruptions at its Peppertree Quarry and Berrima cement plant, both in NSW, with these issues expected to adversely hit earnings to the tune of about $10 million. Boral plans to make up for these costs over the rest of the financial year.

The company’s first-quarter earnings from its North America operations were down on the same period last year, but only slightly. Boral expects signs of improvement in the US housing market should flow through to its results in the second half of the financial year 2020.

“While we expect a five percent EBITDA decline in the first half, we have confidence that we can deliver a better outcome in the second half,” Mr. Kane said.

“In Boral Australia, we expect several major projects to ramp up in the second half, including Queens Wharf and Westgate Tunnel projects,” he said.

The company has also increased its efforts to cut costs, with these initiatives to be “over and above” about $40 million to $50 million of savings already planned for the current financial year.

Glenn Dyer

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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