Boral has revealed the impact of the national bushfires on its earnings as the company’s CEO announced his intent to retire after more than seven years at the helm.
The ASX-listed construction materials producer released its financial results for the first half of FY2020 on 10 February, as well as profit forecasts from its operations spanning Australia, North America, Asia and the Middle East.
Boral has reported its Australian business revenue is down two per cent to $1.7 billion, compared with the same period in FY2019. It continues to be affected by a marked slowdown in housing starts and a seven per cent reduction in concrete volumes.
Despite using cost saving measures to offset volume pressures and $10 million worth of disruption at its Peppertree and Berrima quarries, the company is bracing for further financial interruption after the devastating bushfire season across eastern Australia.
“The impact of bushfire-related disruptions and costs was about $1 million in the first half, but a more pronounced impact on earnings is expected in the second half of the year due to the related slowdown in sector activity since January and higher costs associated with the bushfires,” a Boral statement said.
“Interruptions to infrastructure work already experienced have been exacerbated by the bushfires.”
According to reports in The Age, bushfires led to the closure of some Boral plants and the company was forced to buy water after some was diverted for firefighting and affected building activity.
Boral FY2020 financial statements also factor in adjustments following the discovery of financial irregularities at its North American Windows business, in which accounts were misreported to inflate profitability.
As such, first half FY2020 net profit after tax (NPAT) was $156 million, which is projected to reach $320m to $340m by the end of the financial year. This compares with a restated FY2019 NPAT of $420m after adjusting for the windows business misreporting issue.
CEO steps aside
“Boral’s first half results for FY2020 are broadly in line with our guidance but we have seen a challenging start to the second half of the year,” Boral CEO Mike Kane said.
Kane also announced his intent to retire after delivering Boral’s full-year FY2020 results later this year. He has been with Boral for 10 years, with more than seven of those as CEO.
“It is the right time for me to hand over the leadership of the company during 2020,” he said. “I expect that fresh leadership will build on what we have achieved so far as part of Boral’s transformation and seize future opportunities to deliver shareholder value.
“Boral has changed considerably and I firmly believe Boral is a far better, more focused business today than it was in 2012 when I became CEO. While we have faced some challenges, the strategies we’ve implemented have put the company on a path to deliver stronger financial returns through the cycle.
“We have a portfolio of businesses that are each highly strategic in their own right, and together will deliver more stable returns over the longer term.”
Boral chair Kathryn Fagg said the company is stronger, more resilient and better positioned for growth.
“While the business has faced considerable challenges including lower than expected growth in North America, it is important to acknowledge that since his appointment as CEO in 2012, Mike has set Boral on a path to deliver substantially improved performance for the long-term,” she said.
“Under Mike’s leadership he has significantly improved Boral’s returns on funds employed and earnings per share, and Boral’s safety performance has dramatically strengthened to a level of industry best practice.”