Boral Says Local Brick Making in Danger

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Friday, November 7th, 2014
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Boral warns the local brick making industry may die if the building materials firm is banned from entering a joint venture with rival CSR.

The two companies want to merge their east coast clay brick operations, but the competition regulator is concerned this could create a duopoly with Austral Bricks.

“Sadly for Australia, a narrow view by regulators will see the brick industry on the same trajectory as the auto, oil refining, steel, aluminium and cement industries,” Boral chief executive Mike Kane told the company’s annual general meeting.

The regulator is due to make a final decision on the brick joint venture in December.

Mr Kane also outlined other concerns with Boral’s building products division, including its exposure to the detached housing market.

The company expects earnings in the division to more than double in 2014/15, compared with underlying earnings of $8 million in 2013/14, as it continues to restructure the division.

“Most of our building products go into the detached housing market and it hasn’t been quite as robust,” he said.

“It will continue to be a challenge.”

More heavy rain on Australia’s east coast could also harm earnings in Boral’s construction, materials and cement division, he said.

A rainy winter, including the wettest August in NSW in 16 years, delayed construction activity in key east coast markets.

“Expectations could be dampened if … we experience extended periods of adverse weather,” Mr Kane said.

But stronger residential building activity in NSW was expected to offset weaker volumes for road building and engineering in Queensland.

Boral is also exposed to the US market, where a housing starts recovery is expected to significantly improve its earnings there.

Mr Kane said improved overall earnings for Boral in 2014/15 were likely to come from cost reduction.

Chairman Bob Every also announced he would not stand for re-election in 2016.

By Stephen Johnson
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