Boral’s Earnings Growth Disappoints

Friday, August 26th, 2016
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Shares in Boral have fallen more than four per cent after the building materials maker posted a steady annual profit and forecast a slight improvement in earnings in the year ahead.

Boral made a net profit of $256 million in the year to June 30, almost the same as in the previous year. Excluding one-off items related to its gypsum joint venture with USG, profit rose eight per cent to $268 million.

The company expects a slight improvement in earnings in the 2016/17 year on the back of a strong housing sector and rising demand for its construction materials from infrastructure projects in Australia.

“We are continuing to see a steady growth in housing despite significant pricing pressure in some pockets. Growth in Sydney has more than offset the declines in Western Australia and South Australia,” managing director Mike Kane said .

Housing construction in Australia rose to a record 226,000 starts in 2015/16, led by an 11 per cent increase in multi-residential or apartment blocks.

Demand for materials from major infrastructure projects is also rising in the eastern states, with Boral saying its order pipeline for highways, pipelines, tunnels and airport-related infrastructure is seeing strong growth.

“Demand is quite strong. In FY17, we expect the second half of the fiscal year to be better than the first half – which is a reversal of the normal trend,” Mr Kane said.

Boral shares dropped 30 cents, or 4.2 per cent, to $6.91, and RBC Capital Markets analyst Andrew Scott said the company’s profit was slightly softer than expected.

Boral’s largest division – construction materials and cement – posted a four per cent increase in earnings before interest and tax in 2015/16, and the company expects a similar growth trajectory in the current year.

Its USG joint venture and US operations are also forecast to enjoy earnings growth in the year ahead.

“We see little in the outlook to prompt material changes to consensus expectations for FY17 and beyond and therefore continue to view Boral as fully valued at current levels,” RBC’s Andrew Scott said.

Boral also announced its North American brick business is merging with rival Forterra as part of efforts by both companies to improve efficiency.

“It is a high fixed-cost business and margins and volumes have been affected since the global financial crisis,” Mr Kane said.


  • Net profit steady at $256m
  • Revenue down 2pct to $4.31b
  • Final dividend up two cents to 11.5 cents
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