Australia's housing construction boom has helped Boral rebound to profit, but the building products maker says the benefit of further rate cuts on housing will likely be minimal.

Chief executive Mike Kane said cost-cutting and strong housing markets in Australia, Asia and the US had helped to offset losses from rainy weather and a lack of infrastructure building in Australia.

The company on Wednesday reported a half year net profit of $104.5 million, compared to a net loss of $26.3 million a year ago.

But revenue was down 20 per cent at $2.3 billion.

OptionsXpress market analyst Ben Le Brun said Boral’s stock price had rallied in the lead up to the result but investors were likely disappointed that the company’s return to profit had been driven by cost-cutting rather than revenue growth.

He said Boral’s shares were hovering around five-year highs, having rallied since late 2014 on expectations of a strong US housing recovery in 2015.

But growing speculation of a US rate hike in coming months threatened to slow that recovery down, giving investors cause for concern, Mr Le Brun said.

“It’s all very much a US interest rate story,” Mr Le Brun said.

“If they’re talking about raising interest rates over there, then obviously the complexion for the housing story is maybe not as fundamentally strong as it has been previously.”

Meanwhile, further interest rate cuts in Australia could begin to have less impact on local housing construction, Mr Kane said.

“My experience in the US where interest rates were finally cut to the point where there was very little interest rate left, was that there is a point of diminishing returns as interest rates begin to approach zero,” he said.

“I think it was just about the point where Australia is today that they started to see less of an impact from interest rate cuts on housing formations.

“I would argue there’s no reason why that phenomenon doesn’t probably play itself out here in Australia as well.”

Boral said medium and longer-term earnings growth would come from continued housing market strength in Australia, Asia and the US, while Australian infrastructure activity should start to pick up in the 2015/16 financial year.

Mr Kane said the company could expect future growth and superior returns after the competition watchdog recently approved the sale of Boral’s Western Landfill business, as well as the merger of its brick business with CSR.

The CSR transaction should be completed within the first half of calendar 2015, with Boral reaping a 40 per cent share of the combined post-tax earnings.



  • Net profit of $104m, compared to net loss of $26m in 2013/14
  • Revenue of $2.3b, down 20 per cent from $2.9b
  • Fully-franked interim dividend of 8.5 cents, up from seven cents
By Belinda Merhab