Plant & Equipment

Construction materials help Boral profits soar

For the year ended 30 June, 2015, Boral recorded a 48 per cent increase in net profit after tax to $257 million compared to the previous corresponding period, despite revenue being down 15 per cent to $4.4 billion. This drop in sales was attributed to changes in equity accounting in the company’s gypsum division following the formation of the USG Boral joint venture.

The company’s earnings before interest and tax (EBIT) also increased 21 per cent to $357 million, driven by increased sales in the company’s construction materials and cement division, its building products business and its US operations.

Construction materials and cement – Boral’s largest division – recorded an EBIT increase of 9 per cent to $301 million, which was said to reflect higher property earnings. Conversely, revenue for the division decreased 6 per cent to $3.1 billion. Although concrete revenue lifted 3 per cent, lower revenues from the quarries, asphalt, cement and landfill businesses offset the positive result.

Boral’s quarries experienced the largest revenue drop out of the businesses, with a 16 per cent decline compared to the previous year. Total volumes were also down 2 per cent, with aggregates prices falling 2 per cent on a like-for-like basis.

Commenting on the construction materials and cement division’s performance, Boral CEO and managing director Mike Kane stated, “Strength in Australian housing and the New South Wales construction market, together with higher margins in asphalt, cement and concrete placing due to operational and cost improvements helped the result. These benefits were offset by the impact of lower activity in roads, infrastructure and engineering projects compared to the prior year.”

Boral’s smaller building products division showed a considerable EBIT increase from $8 million in 2014 to $30 million in 2015, with the $22 million improvement attributed to better pricing across all products and markets, the benefits of production volume leverage and improved operational performance and costs. Revenue showed a slight decrease from $487 million in 2014 to $485 million in 2015.

Effective strategies

Kane said Boral’s strong overall performance reflected the company’s efforts to realign its asset portfolio, reduce costs and strengthen the company’s responsiveness to changes in market conditions.

“During the year we took advantage of growth in some of our markets and we undertook dedicated cost reduction programs and delivered higher land sales to offset volume shortfalls in other markets,” he said. “We also continued to pursue improvement programs within each of our businesses to offset inflationary cost pressures. This all helped us to deliver a significantly improved financial result.

“Further portfolio realignment is also strengthening Boral’s ability to deliver improved performance over the longer term. This includes the sale of our Western Landfill business in Melbourne and the formation of the Boral CSR Bricks joint venture during the year,” he added.

For the coming financial year, Boral indicated that materials demand for roadwork, civil infrastructure construction and other engineering work would likely remain “soft”, but that this might pick up near the end of the financial year.

“In Australia, the aim is to strengthen and protect Boral’s leading integrated positions in construction materials and cement, grow margins and build on Boral’s major project capability, and in the small building products division, we are continuing to improve the portfolio and business performance,” a Boral financial statement explained.

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