Boral 1H net falls on Australia, US housing slump
Boral Ltd said Wednesday net profit in the six months ended December 31 fell 10.1% because of a housing slump in its key markets, adding full-year earnings may fall lower.
The Sydney-based company reported earnings of A$132.4m in the first half, down from A$147.2m a year ago, as sales rose 5% to A$2.63bn from A$2.49bn in the same period in fiscal year 2007.
Profit growth at Boral, which makes bricks, roof tiles, cement, plasterboard and other construction products, has been crimped by a residential building slump in Australia’s most populous state, New South Wales, and across the U.S.
"If you look at the U.S., things will be tougher I think rather than easier," Chief Executive Rod Pearse told reporters at a briefing, adding the number of new housing construction starts are forecast to decline 35% this half from a year ago after a 24% decline in the first half.
"Despite the significant contraction in U.S. housing markets and in construction activity in NSW, we have long-term confidence in these key markets," he added.
Boral expects its net profit in the year ending June 30 will be about 15% lower than the A$298m reported in fiscal 2007, largely because of the uncertainty surrounding the U.S. housing market and subject to Australian weather, which may hamper construction.
Boral’s first-half sales growth reflected strong volume in most Australian markets, except in NSW, together with price increases and benefits from growth initiatives, offsetting a 19% decline in U.S. revenue, Pearse said.
About 90% of Boral’s A$360m EBITDA in the half came from Australia, up by A$42m from the first half of fiscal 2007 and from 74% of total pretax earnings a year ago, while U.S. Ebitda contracted by A$64m.
"This geographical shift in Boral’s earnings reflects the significant deterioration in US housing activity and a solid lift in Australian non-dwellings and major projects," Pearse said.
In Australia, pretax earnings from its construction materials business rose 15% to A$236m, helped by infrastructure and nonresidential building projects, and higher prices and sales volumes.
Pretax earnings from Boral’s local building products unit rose 14% to A$90m, driven by improved pricing and volume.
U.S. bricks and roof tiles sales declined 20% and 43% in the half because of a downturn in home building, which account for about 70% of Boral’s sales, across all major markets, Pearse said.
Boral has slowed production and temporarily closed some plants, which will significantly affect its earnings in the second half, he added.
Published under Cement News
