Analysts expect Boral’s 2008 profits to be flat

Analysts expect Boral’s 2008 profits to be flat
Published: 10 July 2007

Australia’s largest building and construction materials supplier, Boral Limited, is expected to report a flat profit in 2008, but a lift in performance is anticipated for 2009, analysts say.  
 
In a report released today by investment bank  UBS, building materials analysts slashed their estimates of Boral’s performance after weak US profits and disappointing housing data in NSW. 
 
"USA profits look as if they will be weak, and last month’s housing data for NSW was disappointing," the report said.  
 
"As a result, estimates are cut to show a flat 2008 profit.  
 
"We assume a recovery in 2009."  
 
Boral had earlier forecast a recovery in 2008 for the US and NSW housing markets, two key sectors for company.  
 
When contacted by AAP today, Boral said it would not comment on the  UBS forecasts, given that the company was to deliver its full-year results next month.  
 
"We won’t give any comment on outlook," a media spokesperson said.  
 
One of the report’s authors,  UBS analyst Satya Tammareddy, said  UBS had predicted previously that Boral profits would have picked up in 2008.  
 
"Previously we assumed that in 2008 the Australian housing market would be much better and we assumed that would improve (Boral’s) 2008 profits," she said.  
 
UBS said in its report that it now expected Boral to make a comeback in 2009, as it was well positioned to benefit from the increased demand when it occurred in Australia and the US.  
 
"Significant investment in manufacturing capacity should stand the company and investors in good stead when demand is there," said  UBS.
 
Analysts at UBS also said the demand for building materials in Western Australia remained robust, although housing affordability was "a major issue".  
 
The company was facing competition from non-listed rival the Buckridge Group, which was building capacity in WA and had recently started acquiring second-hand kilns from eastern Europe.  
 
"Clay brick penetration at 95 per cent of new detached housing is an excellent market for Boral, but one that is unlikely to get better and where there are some risks around the Buckridge Group’s second-hand new entry," analysts said.  
 
They said Boral had a greater long-term value than that implied by the "substantially lower" US earnings in the short term.  
 
Boral chief executive, Rod Pearse said in February that the recovery in the NSW and US markets would be gradual and the NSW market would peak in about 2010 or 2011. 
 
Last November Mr Pearse said a housing recovery was likely in the 2008 calendar year although it was "hard to tell".