Pressure on Boral as lower demand hurts, Australia

Pressure on Boral as lower demand hurts, Australia
Published: 13 September 2011

Analysts warned that the customers of Boral, which issued a profit downgrade yesterday, were suffering under the current trading climate and were less capable of absorbing price rises from the cement maker.

"[Australian Bureau of Statistics] data is showing the concrete price index was up six per cent or thereabouts year on year," David Leitch, analyst at UBS, said.

Citi analyst Hugh Dive commented that: "The end demand is not great, their customers are hurting." Deutsche Bank analyst Emily Behncke noted that in August and July concrete volumes were down around 10 per cent. Boral was criticised in some quarters a month ago when it bought the other 50 per cent of its joint venture with Lafarge - Lafarge Boral Gypsum Asia. However, Boral chief executive Mark Selway argued that the deal gave the group a vital foothold in the Asian market.

Following the deal Moody’s Investor Services revised the outlook on Boral’s ratings from "stable" to "negative." At the time, Moody’s vice-president and senior analyst Maurice O’Connell said that the financial impact of the acquisition and challenging operating environment "has reduced the cushion of the Baa2 rating."