One of Australia’s leading suppliers of cement and building products has defied COVID-19 to deliver a profit which beat original guidance despite COVID-19.

Releasing its results for calendar 2020, cement, concrete and building products maker Adbri unveiled a full-year underlying net profit after tax of $115.6 million.

Whilst this is lower than the $123 million in underlying profit delivered in calendar 2019, it exceeded guidance which had originally been provided of $110.7 million.

That original guidance was withdrawn in April due to uncertainty over slowing market, rising input costs and challenges posed by COVID-19.

Largely speaking, the result reflected cost reductions which were delivered as a result of the group’s cost-out and business improvement program along with stronger than anticipated volumes in the second half in Western Australia.

The cost cutting program exceeded initial targets, yielding $35.5 million in savings.

Across operational units:

• Overall cement volumes fell by 7.1 percent as stronger construction activity in Western Australia was offset by a slowing housing construction market in other states. Clinker volumes were lower due to lower offtake by Sunstate Cement joint venture partner Boral although lime sales increased due to increased demand in the Western Australian gold and non-alumina markets
• Concrete volumes fell 8.3 percent on lower demand in New South Wales and Queensland and the completion of key infrastructure projects in South Australia and the Northern Territory. Aggregate sales volumes rose by 5.0 percent driven by strong demand for quarry products across infrastructure, road maintenance and civil projects, combined with an improvement in residential subdivision in the second half of the year.
• Demand for concrete products was strong across all retail channels and regions for much of the year as consumers directed discretionary household spend towards home renovations and improvements. Conditions remained challenging for the commercial and residential construction sectors although improvement was evident during the second half of the year.

Adbri chief executive officer Nick Miller welcomed the result.

“In the context of the challenging operating environment, the financial outcomes we delivered for FY20 are better than we had expected and reflect the successes of our cost-out and business improvement programs,” he said.

“Adbri also benefitted from improving demand in the Western Australian market during the period which offset slowing demand in east coast markets, particularly in New South Wales.”

“We took a proactive approach to managing the impact of COVID-19, incurring some additional costs to ensure our people and customers remained safe and our sites could remain operational.

Pleasingly, we recorded a further improvement in safety with our Total Recordable Injury Frequency Rate (TRIFR) improving 47.2% to 5.6 compared to 2019.”

Going forward, Adbri did not provide specific earnings guidance citing ongoing uncertainty with COVID-19 and the timing of major infrastructure projects.

In the near-term, the company says demand for building materials will be helped along in 2021 by government stimulus measures including home building grants and infrastructure spending.

Earnings will be further supported by increasing demand for cement and lime from a growing number of mining projects as the resources sector continues to operate largely uninterrupted.

On the cost side, meanwhile, the Group hopes to derive an additional $20 million in saving from its cost savings plan to counter cost headwinds of $10 million this year.

Nevertheless, it said trading conditions would remain challenging until the stimulus measures completely offset underlying softness in east coast construction markets.

In addition, earnings in the group’s lime business are expected to be impacted to the tune of $16 million after tax when a contract with Alcoa concludes in June by the anticipated start-up of a competing cement terminal.

The company is looking at strategic initiatives to unlock opportunities in that business.