Shares in Boral have jumped to a four month high after the building materials maker's half year profit was bolstered by stronger construction activity in Australia and improving earnings in the US.
The company’s net profit in the six months to December 31 rose 12.3 per cent from a year earlier to $153.4 million.
That was despite revenue dropping 4.6 per cent to $2.09 billion, due to the completion of several large projects and accounting matters related to its Meridian brick joint venture in the US.
Boral has continued to benefit from Australia’s strong housing market and rising demand for its construction materials for use in infrastructure projects.
“Housing in Australia is a gift that keeps on giving,” chief executive Mike Kane told reporters.
“The whole market has been amazed at the strength of the housing market. I expect it to stay at lofty levels in the next couple of years.”
Earnings in Boral’s Australian business actually fell in the half year, as higher volumes and pricing gains were offset by completion of work at several LNG projects, the Barangaroo project in Sydney, and the decline in Western Australia’s brick market.
But the company said there was a strong recovery in the December quarter due to dry weather.
Boral’s US business posted higher earnings, helped by an ongoing recovery in housing activity and higher prices, while the USG Boral joint venture also benefited from strong housing markets.
Boral is increasing its exposure to the US market with the $US2.6 billion acquisition of building products supplier Headwaters, announced in November. That deal is expected to complete by mid-2017.
The company has maintained its guidance for full year earnings to be higher than in the previous year, driven by gains in its Australian business.
Those gains are expected to be partially offset by the loss of $6.5 million in earnings before interest and tax (EBIT) from its divestment in November of its 40 per cent share in the Boral-CSR bricks joint venture.
“We view this as a good outcome following relatively cautious AGM commentary,” RBC Capital Markets’ analyst Andrew Scott said.
“An in-line FY17 outlook allows investors to focus on FY18 which offers upside from completion of the Headwaters acquisition and leverage to improving Australian infrastructure spend.”
Boral shares were up 33 cents, or 5.6 per cent, at $6.21 at 1146 AEDT, their highest level since mid-October.
HOUSING AND INFRASTRUCTURE DELIVERS FOR BORAL
* Half year net profit up 12.3 pct to $153.4m
* Revenue down 4.6pct to $2.09b
* Interim dividend up one cent to 12 cents a share