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Boral clinker production halts

The company cites an increasingly competitive domestic and international landscape and a need to improve its competitiveness in the future.

Boral CEO and managing director Mike Kane said that the high Australian dollar and low shipping costs, together with rising energy and other manufacturing costs, are all contributing to higher costs of domestic clinker production relative to imported clinker and cement.

?A continued low level of demand associated with the downturn in Australian building and construction activity is also adversely impacting the profitability of Boral?s cement business, where high fixed cost manufacturing assets continue to be underutilised,? Kane explained.

The suspension to clinker manufacturing at the Waurn Ponds facility, on the outskirts of Geelong in Victoria, is subject to employee consultation but the suspension is likely to start from April 2013. Around 90 jobs will be impacted by the suspension.

Boral will consult with employees and their representatives over the coming weeks to explore all options including averting or mitigating job losses, as well as redundancies and redeployment within Boral where possible.

The clinker manufacturing assets have a book value of approximately $100 million.

The site at Waurn Ponds will continue to operate as a cement milling facility using imported clinker.

The change will result in 25 to 30 per cent of Boral?s clinker requirement being imported, which is in line with the Australian industry average.

Boral?s fixed cost base will be reduced while flexibility to respond to changes in east coast market demand will be increased.

Boral adds that the continuity and quality of cement through its extensive supply network will be maintained as part of a transition to more flexible supply arrangements of cement manufacturing and clinker importing.

?Construction materials in Australia is a core business for Boral, with cement remaining a critically important product in Boral?s integrated position,? Kane said. ?However, across all of our businesses we need to ensure that we are aligning our domestic production with demand levels, and that our cost structures are globally competitive and can be sustained through the cycle.

?In February 2013, at the time we announce Boral?s half year results, I will provide an update on the outcome of the broader review work that is underway across Boral?s portfolio of businesses,? he added.

?Not only have we been rigorously re-sizing capacity and divesting or closing underperforming operations, we are also focused on reducing excessive overhead costs and reducing capital expenditure.?

Source: Boral Pty Ltd

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