Adelaide Brighton’s clear, organic focus, Australia

Adelaide Brighton’s clear, organic focus, Australia
Published: 21 March 2011

Since becoming managing director of Adelaide Brighton (AdBri) in 2001, Mark Chellew has focused on shareholder returns and helped the group become an achiever in an industry that has struggled under a depressed construction and housing market.

"Our strategy is very clear; we are a cement- and lime-producing company operating in a vertically integrated market," he says. "Our primary aim is to look at acquisitions in concrete and quarries or lime, and we’re unlikely to diversify out of our core competencies," he said in a recent interview with the Wall Street journal.

"We’re Australian-based, that’s what we’ve been successful at and that’s what we will continue to invest in. If we can’t find something in that space, we’ll give money back to shareholders."

AdBri paid a special dividend of 2.5c to investors at its last result, taking the total payout for the period to 11.5c. The company posted a 23 per cent rise in net profit to A$151.5m for the year ended December, a solid result that was in line with expectations. With these results both Deutsche and Commonwealth banks chose AdBri as their top pick for the sector and Macquarie’s Doug MacPhillamy recommended it as an outperform.

"Adelaide Brighton was generally the outperformer on operating and financial metrics across the reporting group . . . it reported the strongest sales growth, margins, cost improvement, balance sheet and interest cover," the Commonwealth’s Athlene Piech said.

Infrastructure projects in South Australia and mining demand in Western Australia have been the key to outperformance of its peers, analysts say.

"SA and WA account for 44 per cent of revenues, but we highlight that these two states are likely to account for a much greater proportion of earnings before interest and tax, given the higher margin cement and lime operations in these markets," MacPhillamy says.

AdBri is focused on organic growth and expects to invest A$94m over the next two years in lime and cement, but Chellew knows there will be opportunity for further consolidation.

"There’s more consolidation to come in the industry with independents, but that will happen over generational time, not over a quick time," he says. "That’s a five to 20-year process and it will happen slowly."