Home renovation activity is likely to remain strong as interest rates stay low and house prices rise, paint group Dulux says.
The group’s chief executive Patrick Houlihan told shareholders on Thursday it was more upbeat about the market for improving existing homes rather than building new ones.
“This large and profitable segment has proven to be quite resilient, and this is expected to continue, underpinned by high levels of home ownership, low interest rates and high house prices,” he said.
Mr Houlihan said the housing construction market was expected to remain strong, but added this represented less than 20 per cent of Dulux Group’s revenue.
Dulux is less positive about its commercial and infrastructure division, which comprises about 16 per cent of its revenue.
“In Australia, the outlook for major engineering and infrastructure projects is weak as major capital expenditure projects – particularly in the mining sector – wind down, and the pipeline of new infrastructure projects is still some time away,” Mr Houlihan said.
He expected the group to deliver an even stronger profit result for 2014/15.
Dulux had a net profit of $104.5 million in 2013/14, which represented a 39 per cent increase on the previous financial year’s $75 million.
Excluding non-recurring items such as costs associated with the acquisition of building products and garage door supplier Alesco, net profit rose 21.4 per cent to $111.9 million.
Mr Houlihan said conditions in China and Papua New Guinea were expected to remain relatively soft.
He also pointed to softness in the garage doors and openers segment of the business, but this was offset by growth in the paints and coatings division.
Mr Houlihan said the company would monitor the “potentially adverse impact” of a lower Australian dollar and the favourable effects of a lower oil price.