Profits plunge but Boral builds hope on new housing
Sydney Morning Herald
Thursday August 20, 2009
BORAL has expressed hope the heavily depressed US and Australian housing sectors could stage a recovery next year, after the building materials group reported a 42 per cent fall in full-year net profits to $142 million.Shares in the company rose to a 10-month high yesterday. The result, which was flagged in a profit downgrade in February, was ahead of analyst forecasts.The biggest blemish was Boral's US business, which reported a $61 million pre-tax loss compared with an $11 million profit before interest, tax, depreciation and amortisation in the previous year. Australian earnings fell 13 per cent, with the group's construction materials business being the strongest performer. Its profits fell 3 per cent.The chief executive, Rod Pearse, who is expected to retire at the annual meeting in October, also argued he was leaving the company in solid shape, despite the deflated profits and recent concerns over the group's over-stretched balance sheet.Boral shares closed 20c higher at $5.86.Mr Pearse said the group's reduction of its net debt in the second half from about $2.2 billion to $1.5 billion, partly helped by the sale of its stake in Adelaide Brighton, took Boral's debt to where it was in mid-2008."It's pleasing it's back there," said Mr Pearse, who is still under pressure to raise capital in order to lighten the balance sheet.The result was helped by $11 million of net one-off benefits. The $64 million reduction of tax provisions and $38 million profit from the sale of its 17.6 per cent stake in Adelaide Brighton helped offset the group's $80 million of write-downs of its US and Australian businesses.Despite the losses in the US, Mr Pearse said the business had performed well given the slump in the US housing sector. Mr Pearse also remained coy about his possible replacement.The Boral USA boss, Emery Severin, the group's chief financial officer, Ken Barton, and the head of Australian construction materials, John Douglas, are considered possible replacements.Mr Severin was considered a firm favourite but his chances of taking the top job have taken a dent over the poor performance of the US business and signals the incoming chairman, Bob Every, wants to have a say in the appointment.Boral's expectations of a pick-up in the housing sector in the second half of this financial year was tempered by its prediction that the fall in non-residential construction would hit its construction materials business.Mr Pearse also remained cautious about the housing recovery, given he held back from providing a full-year profit forecast and said he was unsure of the "shape of the recovery".Mr Pearse also noted it was a significant benefit to shareholders that the company did not buckle to market pressure and raise capital at the start of the year, when its share price dipped to as low as $2.29."We took the view early in the year the underlying strength of the business model and its ability to produce cash was sound," he said.Boral declared a fully franked final dividend of 5.5c a share, which is 11.5c down on the previous corresponding period. It is payable on September 28.
© 2009 Sydney Morning Herald