A significant recovery in home building activity in New South Wales as well as cost reduction strategies have enabled building and construction materials manufacturer Boral to post a large jump in first-half profits, albeit with a revaluation of the Group’s gypsum business meaning it reported a net loss once significant items are added in.
In its latest announcement, Boral announced a 73 percent rise in net profit after tax of (before significant items) to $90 million in the six months to December 2013.
Whilst improvements were evident in all of the Group’s operating segments, the results were predominately driven by a 30 percent rise in earnings from its Boral Gypsum division as well as a six percent increase in earnings in the Group’s largest division in Construction Materials and Cement – results in the former being driven by improvement in the domestic market as well as a rise in plasterboard sales in Asia and those in the latter reflecting strong project activity and dry conditions in New South Wales and Queensland.
Cost savings and improved home markets in New South Wales and Western Australia, meanwhile, saw the group’s Building Products division return to profit whilst losses in the Group’s American business eased amid improving volumes in brick and tile slats.
A once-off $117 million revaluation of its Boral Gypsum division related to the sale of those assets into a joint venture with US building materials manufacturer USG Corporation, however, caused the group to incur a net loss after tax (including significant items) of $26 million.
Company CEO Mike Kane says the improved performance reflects improving industry conditions and better cost management.
Furthermore, despite warning that project volumes, weather conditions and costs associated with moving to a joint venture model meant profit numbers for 2013/14 would be skewed toward the first half, meanwhile, Kane says he reasonably optimistic about the company’s near term outlook.
“We expect the underlying performance in each of Boral’s four divisions to improve in the second half of the financial year compared to the prior comparable period” Kane said.
Last October, Boral announced it would fold its Gypsum division including its plasterboard operations in Australia and Asia into a $US1.6 billion joint venture together with the Asia and Middle Eastern businesses of US building materials manufacturer USG Corporation to create a more formidable business with 633 million square meters of plasterboard manufacturing capacity targeting Australasia, Asia and the Middle East.
That joint venture is expected to be fully in place by February 28.
Prior to the aforementioned improvement in first-half earnings, Boral had been impacted in recent years by a combination of a strong Australian dollar and weak domestic building conditions.
That caused the company to slash capacity and headcount and book $316 million in write-downs last year, taking its overall result for 2012/13 to a net loss after tax of $212 million.