Adelaide Brighton reports record revenue

Adelaide Brighton reports record revenue
Published: 26 February 2016

Adelaide Brighton has reported record revenue of AUD1413.1m (US$1017.35m) for 2015, representing a YoY increase of 5.6 per cent supported by cement and lime volumes, improved prices and the contribution of acquisitions made in the second half of 2014.

Net profit after tax (NPAT) attributable to members of AUD207.9m for the year ended 31 December 2015. Property contributed AUD34.9m to NPAT on cash proceeds of AUD47.9m.

Underlying EBIT, excluding property profits increased 4.5 per cent to AUD255.3m. Significant items of AUD1.7m before tax related to corporate restructuring, acquisition costs and a fair value gain on acquisition.

Excluding property earnings, underlying EBIT margins were down slightly from 18.3 per cent to 18.1 per cent.

The company said that a number of factors constrained margins including the geographic mix of cement sales, joint venture earnings, import costs (due to currency), and increased proportion of concrete revenue. Almost fully offsetting these were benefits from volume growth, price rises, operating
efficiencies and reduced transport costs.

Strong residential demand in the eastern states improved demand for cement, clinker, concrete,
aggregates and concrete products. This offset reduced sales in South Australia.

Sales volumes increased for all products, assisted by demand in New South Wales, Victoria and Queensland and margins increased in concrete, aggregates and concrete products.

Cement and clinker

Sales - Increased demand from east coast residential more than offsetting weaker resources
Cement and clinker sales volumes increased marginally in 2015. Strong demand in New South
Wales, Victoria and southeast Queensland, was primarily driven by residential construction. This
demand more than offset the previously anticipated reduced sales to a major South Australian
customer and lower sales to resource projects in Western Australia and the Northern Territory.

Residential demand continued to be a driver of activity in the eastern states, with a recovery in the south east Queensland market and strong housing commencements in New South Wales and Victoria. Residential markets in Western Australia and South Australia remained subdued.

Several major infrastructure projects in South Australia are expected to contribute to demand in
2016 and the outlook for infrastructure in New South Wales and Victoria remains healthy. Despite price increases in the majority of cementitious markets, the geographic mix impacted average realised
prices, partly offsetting the benefits of volume increases.

Import volumes continued to grow as Adelaide Brighton took advantage of offshore supply to meet
domestic demand while rationalising domestic manufacturing capacity in Western Australia. The
volume of imported cementitious material sold by the company exceeded 2.1Mt in 2015, representing more than 20 per cent of estimated industry demand.

Operations - Munster clinker rationalisation delivers further savings
Clinker production has ceased at the Munster site in Western Australia and instead is being imported to meet local market demand. The rationalisation delivered cost savings of circa AUD10m in 2015, which was an incremental AUD5m over the savings delivered in 2014.

Adelaide Brighton said its Birkenhead cement works had a good year in 2015, with clinker capacity fully utilised by demand from South Australian and Victoria markets. This was despite a reduction in sales to a major cement customer in South Australia.

Joint arrangements and associates

Independent Cement and Lime Pty Ltd (50 per cent)
Demand in New South Wales and Victoria led to an overall increase in Independent Cement and Lime's (ICL) volumes, however, Adelaide Brighton said the impact of rising input costs and limited opportunity
to recover those cost increases resulted in an overall decline in earnings from AUD9.1m to AUD7.9m in 2015.

While the first half was weak, the profit contribution recovered in the second half to AUD4.9m. Rising volumes, higher selling prices and lower input costs contributed to second half profitability

Sunstate Cement Ltd (50 per cent)
Sunstate is a joint venture between Adelaide Brighton and Boral Ltd and operates a cement
milling, storage and distribution facility at Fisherman Islands, Port Brisbane.

The recovery in demand in southeast Queensland has resulted in contribution to Group EBIT from Sunstate increasing from AUD8.1m to AUD8.3m. Market dynamics in the region remain somewhat
difficult. While volumes, pricing and cost control contributed to improved earnings in 2015, second half
earnings were affected by a reduction in shareholder off take volume.

Aalborg Portland Malaysia (30%)
Aalborg Portland Malaysia manufactures and sells white cement and clinker for the domestic Malaysian
market and exports to Australia and markets throughout southeast Asia.

The contribution to Adelaide Brighton group earnings declined from AUD1.4m to AUD0.9m. Following the completion of the US$18.6m capacity expansion in the second half of 2014 , a longer than expected commissioning phase led to higher costs.

Production rates met expectations in the last quarter of the year resulting in an improvement in
profitability over this period.