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.
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.
Macquarie had already set its forecasts below Adelaide Brighton's prior guidance range on concerns over Queensland demand, but new guidance is lower still, given weak demand in SA and Victoria as well, leading the broker to cut forecasts a further -22%.
Adelaide Brighton has downgraded FY profit guidance by -10-15% due to weak demand in residential construction, insufficiently offset by a lower exposure to infrastructure, falling cement/concrete prices in Qld which the broker sees going lower, and competition in South Australia.
Morgan Stanley believes the 2018 performance was in-line, but the outlook is suggesting much tougher times lay ahead. The latter is seen at odds with the stock's premium valuation, suggesting weakness needs to follow to pull ABC stock back in line with its peers.