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Boral aims to preserve cash supply in COVID-19 market update


Boral has announced it is aiming to preserve cash supply, and said it will slow production abroad to align with lower activity, in a COVID-19 market update.

With safety as its number one priority, the company also stated it is taking “decisive actions” to preserve its cash and protect Boral for the long term, which includes a reduction in costs and discretionary expenditure along with pursuing government relief strategies to apply to its business.

Boral said demand is declining and expected to continue to decline, particularly in residential construction markets, in all geographies.

The company said it will slow production to align with lower activity levels including shift reductions and temporarily closing some of its plants.

However, the company stated it is supporting employees impacted by site closures with access to paid leave, unpaid leave, flexible and remote working arrangements, and access to relevant government support programs.

So far, Boral has temporarily closed some facilities in North America and Asia due to tighter restrictions. The company is prepared to navigate the pandemic’s effects on the industry carefully, according to Boral’s CEO and managing director Mike Kane.

“Our number one priority continues to be the safety, health and well-being of our people, our customers and any visitors to our sites,” Kane explained. “We continue to implement measures to help minimise the spread of the virus and to help ensure the safety of our people and our communities.

“We are also carefully managing the business to protect the financial sustainability of Boral and to ensure Boral is in good shape when we get through the pandemic crisis. Through our business continuity and scenario planning, we are preparing for a full range of potential disruptions.

“I acknowledge the safe and swift actions of Boral’s people in responding to the current challenges. Together we are working to ensure Boral comes through this period as a strong company.”

As of March 2020, Boral has $890 million of cash and undrawn committed funds, along with $73 million from the company’s sale of Midland Brick to be added in June.

The company will be repaying $US76 million for the maturing tranche of US private placement (USPP) notes this month.

Boral is anticipating to maintain a “strong liquidity position and robust balance sheet” from its current actions during COVID-19.

Joint venture with Knauf

Boral has also been seeking to form a new 50:50 joint venture with plasterboard multinational Knauf in Asia. As part of that partnership, Boral was hoping to regain a 100 per cent ownership stake in USG Boral’s Australian and New Zealand operations, with a call option for 50 per cent of that stake to be passed to Knauf within five years.

However, Boral arrived at the view in late March that that the necessary regulatory approvals required to allow the transaction to be implemented (as signed in August 2019) would not be achievable by the 30 June sunset date.

In its market update, the company stated it and Knauf are exploring other options; Boral is seeking a cash neutral transaction, rather than a transaction with a significant funding requirement.

Any revised transaction will be subject to agreement between the two parties and will still require regulatory approval from the Australian Competition and Consumer Commission and the New Zealand Commerce Commission. As a result, Boral’s pre-existing $USD400 million acquisition bridge facility, put in place for the purpose of completing the transaction with Knauf, has been allowed to lapse.

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