Boral gets big on rebuilding
The Age
Thursday February 10, 2011
BUILDING materials supplier Boral says its full-year profit will increase by more than 20 per cent after a strong first-half result and an anticipated surge in demand due to rebuilding efforts in Queensland.Boral chief executive Mark Selway said the group expected to post a full-year net profit of $160 million to $175 million, compared with $132 million last year. Boral's shares rose 42, or 8.9 per cent, to $5.14.It yesterday announced a half-year net profit of $92.3 million, up from $67.9 million last year, despite underlying construction activity remaining largely flat.While much of the improvement came from significantly lower interest costs after a July capital raising, a Nomura analyst, Simon Thackray, said the result was of "high quality"."It was very apparent in the results . . . that not only has there been clear progress, the best is yet to come," Mr Thackray said."There was some scepticism around both weather-related impacts and whether or not the new management were . . . achieving anything."The first-half [result], which is stronger than most people would have expected, is a bit of a vindication for the management team."Mr Selway said delays to projects caused by the recent weather in the eastern states would cost the company "at least $20 million". But he said the deferral of revenue would be more than offset by revenue generated by the rebuilding, albeit over a longer period."The issue in the longer term is whether or not we're going to see that [revenue] in this financial year or whether some of that moves into the 2012 financial year."The company's full-year profit forecasts did not include any potential upside from the rebuilding efforts, which Mr Selway admitted was cautious. But he said it was "a fine line" given the unpredictable nature of the weather.Mr Selway said Boral's asphalt and cement businesses immediately stood to benefit from an estimated $3 billion worth of road and bridge rebuilding.Analysts estimate the rebuilding could spark a 15 per cent growth in Boral's Queensland revenue. The state provides about a quarter of the company's Australian profits.With the US housing market still in the doldrums and only four of its 23 brick plants operational Boral's US division posted another half-year loss of $47 million.Though still short of its break-even point of 1 million starts, Boral said the US market was showing tentative signs of recovery. Boral said it expected total US housing starts for the this financial year to be 603,000, rising to 725,000 in 2012, but still well off the long-term average of 1.5 million starts."We're feeling more comfortable about the US market than a month ago and certainly more comfortable than a quarter ago," Mr Selway said.
© 2011 The Age
