Boral upbeat on 2010 despite US, Australian housing slump
The Age
Thursday August 20, 2009
BORAL has expressed hope that the heavily depressed US and Australian housing sectors could stage a recovery into 2010, after the building materials group reported a 42 per cent fall in full-year net profit to $142 million.Shares in the company rose to a 10-month high yesterday, with the result €” which was flagged in a profit downgrade in February €” being ahead of analyst forecasts.The biggest blemish was Boral's US business, which reported a $61 million pre-tax loss compared with a $11 million profit before interest, tax, depreciation and amortisation in the previous year.Boral's Australian earnings fell 13 per cent, with the group's construction materials business being the strongest performer. Its profits fell 3 per cent.Boral chief executive Rod Pearse, who is expected to retire from the group at October's annual meeting, also argued he was leaving the company in solid shape, despite the deflated profits and recent concerns over the group's overstretched balance sheet.Boral shares closed 21 higher at $5.87.Mr Pearse said the group's reduction of its net debt in the second half from around $2.2 billion to $1.5 billion, 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 company's 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 Boral's sale of its 17.6 per cent Adelaide Brighton stake 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 continuing slump in the US housing sector.While Mr Pearse remained coy on his replacement, Boral USA boss Emery Severin, the group's chief financial officer, Ken Barton, and the head of Australian construction materials, John Douglas, are all considered possible candidates.Boral's expectations of a pick-up in the housing sector in the second half of this financial year was tempered by its prediction the fall in non-residential construction would hit its construction materials business.Mr Pearse also remained cautious on the housing recovery, holding back from providing a full-year profit forecast.He also noted it was of a major benefit to shareholders the company did not buckle to market pressure and raise capital at the start of the year, when its share dipped 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 5.5 a share, down 11.5 on the previous corresponding period and payable on September 28.
© 2009 The Age
