A mining boom would more than compensate for falls in housing construction demand for cement maker Adelaide Brighton in the next few years, chairman Malcolm Kinnaird said yesterday. Mr Kinnaird and managing director Mark Chellew gave upbeat presentations to shareholders at the annual meeting in Adelaide, with the company looking for a 1.7 per cent rise in return on shareholders’ funds to 15 per cent this year.
Mr Kinnaird said the lime and cement maker had experienced a drop in first quarter sales at its New South Wales brick and concrete businesses as a direct result of a housing slump last year. However business in other states and demand from the mining sector had kept the weakness to a minimum, he said. "Whilst we see at this stage the construction cycle being relatively firm until 2007, we do expect some easing of demand in 2008," Mr Kinnaird said. "We believe that the increasing demand for lime from the resources sector will provide Adelaide Brighton with a valuable hedge against a softening cement demand."
The market was equally bullish about the company’s outlook, sending the shares almost 6 per cent higher, up 9 to $1.61, amid generally positive trade yesterday. The news helped the rest of the construction materials sector, with Boral up nearly six per cent, CSR up nearly three per cent and Rinker and James Hardie also firmer. Brokers said sentiment towards building products companies had improved on the belief they would not be as badly affected by the housing slowdown in Australia as previously thought.
Mr Chellew said the company would increase its lime production capacity to cater for the burgeoning mining and resources demand while demand had also picked up from infrastructure projects. Adelaide Brighton also would increase the amount of clinker it imported to meet demand, although its Birkenhead processing plant was at capacity, processing an annual 1.3Mt of clinker. Meanwhile the company aimed to halve its $16 million gas consumption costs and switch to 30 per cent use of alternative fuels to fire its kilns by the end of 2005, through its Alternative Fuel Co joint venture with Resourceco.
Mr Kinnaird said competitor and former takeover predator Boral, which still holds a 19.9 per cent stake in the company, had given no indication to the board as to its intentions for the stake.