Boral Ltd’s full year net profit has dropped 18.6 per cent, dragged down by an earnings loss at its US business, which is likely to worsen this year on that country’s ongoing housing slump.
Still the $242.8 million profit for the 12 months to June beat the guidance of $234 million the construction materials maker provided in May.
Revenue also lifted 5.8 per cent to $5.198 billion as Sydney-based Boral increased sales at a higher price for cement and other building products in Australia.
The result from the US "has to be disappointing," chief executive Rod Pearse told media in a phone conference.
"It’s been such a good market for such a long time and now we’re going through a generational downturn."
Mr Pearse is expecting the US division’s earnings before interest and tax (EBIT) for 2008/09 to be lower than the loss of $27 million for the year just past, in a housing slump that has another 12 months to go. There are 10 months worth of unsold new houses in the US and foreclosures are adding to the stock, Mr Pearse said.
Just two years, ago the EBIT contribution from the US business was 30 per cent of the total, according to Mr Pearse.
Boral has cut its US work force by 40 per cent, or 1,400 employees, over the past two years while mothballing many of it brick factories and operating its tiling plants below capacity.
Still, the estimated housing construction numbers for the coming year were about half the underlying demand in the US, so activity would increase at some stage, Mr Pearse said.
"The question is, when," he said.
Mr Pearse said it was too early to give more detailed guidance for the 2008/09 year, given the volatile markets, and he would give an update on trading conditions at the annual general meeting on October 24.
Shares in Boral ended down eight cents, or 1.31 per cent, at $6.03.
Boral’s total EBIT was fell 16 per cent to $448 million as the Australian businesses partially offset the losses from the US.
The biggest contribution came from Boral’s construction materials division, where EBIT grew 10 per cent to $351 million, as the company benefited from non-housing construction in Australia.
The company’s building products business, including bricks, roofing and masonry, grew EBIT 15 per cent to $114 million as the company increased prices and volumes, particularly in Queensland and South Australia.
Looking to 2008/09, Mr Pearse said Boral expected to see a further lift in construction materials earnings in Australia, although building products would be broadly steady.
"There is dwelling stock deficiency, and there’s talk from the Reserve Bank of Australia about rate cuts. That should lead to a change in sentiment ... and that will be good for our businesses," Mr Pearce said.
Boral’s EBIT at its Asian business fell 45 per cent to $7 million as construction materials fell because of increased competition. The plasterboard joint venture with French construction materials maker Lafarge continued to do well.