A competitor’s problems in the US are likely to translate into profits for Australian-based Rinker Materials. Just as the world’s oil producers continue to struggle meeting global demand, it appears the same is true for cement. And like oil stocks, cement and concrete leveraged stocks continue to hover near all-time highs.
When it upped its full-year profit growth forecasts from 5-10 per cent to 20 per cent last month, Rinker said it was being helped by cement shortages resulting from competitor Titan America’s problems at its Florida cement plant. Now, there are signs the shortages could be worse (or better in Rinker’s case) than expected.
On Tuesday a US National Home Builders Association survey said cement shortages reported in Florida in April had blown out into a nationwide shortage of cement, gypsum wallboard, bricks, steel framing and insulating materials. Good news for the likes of Boral, the largest brick distributor in the US.
Credit Suisse First Boston said: "Cement shortages appear attributed to strong US domestic demand (housing in particular), limited freight availability, global cement shortages and some local production difficulties."
With the shortages giving way to higher prices, CSFB reckons every $US5 increase in the price of cement in Florida will help Rinker’s gross profits by $20 million a year.