US Hurricanes Fail To Flatten Australia’s Rinker

US Hurricanes Fail To Flatten Australia’s Rinker
Published: 16 November 2004

Higher product prices and strong US building activity helped Australia’s Rinker Group Ltd offset rising costs and Florida hurricanes to beat market earnings forecasts in its fiscal first half. The construction materials company, which makes 80 per cent of its earnings in the U.S., on Tuesday also upgraded its profit guidance for the full year, a move welcomed by investors who pushed its shares to a record high.

The Sydney-based maker of cement, asphalt and concrete blocks posted a 26 per cent rise in net profit to A$293.8m in the six months ended Sept. 30 from A$232.8m a year earlier. The result beat analyst forecasts of between A$266m and A$290m. Despite higher freight, energy and input costs and a stronger local currency, Chief Executive David Clarke said he is upbeat about the outlook for the rest of the year. He forecast operating earnings growth of up to 30 per cent in the full year, up from earlier guidance of about 20 per cent, citing strong construction activity across Rinker’s main markets.

"The base business is growing very strongly both in terms of pricing and volumes, and the outlook is generally favorable in the U.S. and Australia for those businesses," Clarke told analysts in a briefing. "We expect further price increases across the US and Australian businesses will offset higher costs," he said. Some analysts and investors were also upbeat about Rinker’s first half, saying the company continues to benefit from recent acquisitions, price rises across its product portfolio and stronger building
conditions in its key US markets of Florida, Arizona and Nevada.

"It was a very solid result, it’s above expectations and you’ll probably see the market analysts upgrade their numbers," said Matt Williams, Australian equities manager at Perpetual Investments, which owns nine per cent of the stock. "It’s a solid company operating in a very good environment in the US, particularly its reliance on Florida, which has been a very strong market for it," Williams said.