Boral Ltd has reported a dip in first half profit and stuck to its forecast for lower annual earnings, but the brick, tile and concrete maker has forecast a recovery in its two key markets in 2008.
The recovery in the New South Wales and United States housing markets will be gradual and, in NSW, will not peak until 2010 or 2011, chief executive Rod Pearse told journalists today.
Falling dwelling commencements in those markets contributed to a 14.6 per cent drop in Boral’s first half net profit to $147.2m.
Boral said it still expects an annual profit 15 per cent below last year’s $362m figure.
Boral has been rumoured as a target, but last October, in response to a stock exchange query, the group said it had no knowledge of a rumoured bid from Cemex, the Mexican cement company bidding $US12bn ($A15.57bn) for Australian building products maker Rinker.
"... We’ve made no comment since and I think that’s where I’ll leave it," Mr Pearse said today.
Boral is expecting national dwelling commencements to fall about four per cent to 145,000t in fiscal 2007.
But signs of a recovery are already evident, with commencements for the first half up two per cent.
Also on the positive side, Mr Pearse said underlying inflation is moderating, rents are rising and housing demand is strong.
In Sydney, for example, commencements are operating at 32 per cent below underlying demand.
Nevertheless, Mr Pearse thinks the effects of the three interest rate rises last year, which weighed on already low housing affordability, are yet to be fully borne out.
"(There are) some positive things for the future, but I think it will take some time.
"We’re looking at about four years from the peak in 2003 to the bottom in 2007 and then three or four years to the peak in 2010 or 2011."
In the US, housing conditions in the 2007 first half were even worse than NSW with dwelling starts down 23 per cent.
They are forecast to be down significantly for the full year, but like in NSW, there was a slight uptick in December.
"... Our view is that we won’t see a turnaround in the US market until calendar year 2008," Mr Pearse said.
Boral said effective price and cost management, like temporary plant closures, should mitigate some of the housing-related volume impacts in Australia and the US.