Rinker says construction outlook positive

Rinker says construction outlook positive
Published: 31 January 2006

Heavy building materials company Rinker Group Ltd says the outlook for its key markets of the United States and Australia continues to be favourable, despite a slower housing construction sector. The group today upgraded its annual earnings forecast as it reported a 48 per cent jump in third quarter net profit to $US161m ($A215m).

Chief executive David Clarke flagged that the strength in Rinker’s US business is set to continue, confirming expectations of price increases in that market, which contributes about 80 per cent of group earnings. Rinker also expects strong commercial construction in both Australia and the US to help offset slower housing markets as well as high fuel and raw material costs.

Rinker now expects its US business Rinker Materials to lift pre-tax earnings by 35 to 40 per cent above the previous year’s $US578m.The company still anticipates its Australian cement business Readymix to match the $US191m pre-tax earnings for the year to March 31, 2005. But Mr Clarke said it was too early to forecast earnings growth for the next fiscal year because of rising fuel and raw material costs.

He also confirmed that Rinker expected further price increases in the US. "It seems likely that the January price rises in Florida will hold and that will realise around eight to 10 per cent," Mr Clarke said. Rinker also expects to increase prices by 10 per cent in Arizona in April. Although major US forecasters have predicted a housing slowdown this calendar year, Rinker says commercial and infrastructure construction should offset the decline.

A strong performance by Rinker’s aggregates and concrete businesses in Arizona and Florida lifted third quarter trading revenue by 14 per cent to US$US1.24bn. However, Rinker also faced surging costs, with the cost of electricity up 17 per cent compared with the same period a year ago, coal up 20 per cent, ocean freight 82 per cent and diesel 29 per cent.