Batstone blames the downturn in new housing starts, bad weather that delayed major projects and an earlier than planned maintenance shutdown at Boral’s Waurn Ponds Cement Works factory in June for the downgrade.
Boral told analysts about two-thirds of the latest profit downgrade resulted from delays in two major projects - the Gladstone LNG project in Queensland and the Peninsula Link in Victoria.
Boral’s net profit after tax and before significant items for the 12 months to June 30, 2012, is expected to come in at around $100 million to $110 million. This was down from estimates of $128 million to 153 million provided in April and guidance given in February for net profit before significant items of $150 million to $175 million.
The earnings guidance was dependent on two Boral-owned properties being sold before the end of the 2011-12 financial year.
The news sent Boral shares southward to a post-financial crisis low and caused Moody’s Investor Service to downgrade Boral's investment rating to Baa3 after the news.
Moody's vice president and senior analyst Maurice O'Connell said Boral's financial profile was "inconsistent'' with its previous Baa2 rating.
“Boral’s underlying strategy remains sound. We will continue to focus on the reduction in borrowings through the divestment of non-core operations, tight management of capital expenditure and working capital. Capital expenditure for FY 2012 is now projected to be at the lower end of the $400 million to $450 million guidance given at the half year,” said Batstone.
“Based on our current strategy and plans, we do not expect there will be any need for additional equity raising in the short to medium term. Boral continues to operate comfortably within its banking covenants.
“We continue to focus on our core strategies, the integration of the acquisitions made during the first half of the year and the divestment of non-core businesses.”
Sources: Boral, The Age, Ninemsn