As COVID-19 restrictions slowly ease across Australia, many of the construction industry’s top players, such as Boral, Fletcher Building, James Hardie and ADBRI have recently had to apply a sweep of changes to their business operations.
The joint Australian Industry Group/Housing Industry Association Performance of Construction Index reached record lows for April, but state governments across the country have since made a steadfast effort to keep cash flowing for the industry.
Victoria is pledging $2.7 billion towards a construction blitz, while New South Wales is fast tracking approval of more construction projects that will inject $7.54 billion into the state’s economy.
With more activity now on the horizon, the industry’s major players will be required to supply more aggregates that will cushion their financial blows from COVID-19.
Boral
Boral has waded through COVID-19 cautiously and has kept its 396 Australian sites in operation during the pandemic.
Despite the lights staying on, the building and construction company has seen its earnings margins slip between three to five per cent from January to April this year.
An industry-wide regression has blemished the aggregates market, with concrete volumes down by 16 per cent from January to April, along with fly ash volumes being reduced by eight per cent.
“The impacts of COVID-19 measures on our people and our markets have been significant and will be for some time,” Boral chief executive officer and managing director Mike Kane said. “We have taken early actions and we are continuing to respond to changes, including aligning production and cost structures with demand.
“We have increased Boral’s liquidity and extended our debt maturity. Together with careful management to preserve cash, we have further bolstered Boral’s liquidity position, and our balance sheet remains robust.”
According to a report by FNA Arena, the company could face a difficult 2021 financial year, due to a slowing demand for building activity, with UBS predicting Boral’s FY21 Australian revenue will drop –by up to 10 per cent.
Boral currently has $1.3 billion in cash on hand and undrawn debt facilities, which marks an increase from $1.14 billion during the December quarter.
Fletcher Building
Fletcher Building has faced severe impacts from COVID-19, with its operations being marred in New Zealand by the country’s Level 4 lockdown, causing the company to cut back its workforce.
Operations in more than 400 Fletcher Building sites were completely shut down in New Zealand at the end of March, with operations returning on 28 April.
Due to no revenue earned in New Zealand across that period, and Australia’s revenues running at 90 per cent of what was expected pre-COVID-19, the company recorded an operating EBIT loss of $CDN55 million ($AUD60 million).
Fletcher Building chief executive Ross Taylor said in May that COVID-19 will have impacts across its New Zealand and Australian market share as the company takes a step back to prepare itself.
“While there is a lot of uncertainty over the economic outlook, we expect COVID-19 will lead to a sharp downturn in FY21 and potentially beyond,” Taylor said.
“Looking to the next financial year, we are planning for an environment that will see a shrinking economy, substantially reduced customer demand across all our businesses and sustained lower levels of productivity.”
Taylor stated that the company will be reducing its spending and reviewing the number of people it employs across both sides of the Tasman.
“While we looked at all parts of our business to remove costs, regrettably we believe we will not be able to support the same number of people,” he said. “We have to make some very difficult decisions which include looking at reducing the number of people we employ by approximately 10 per cent. This will equate to around 1000 positions across New Zealand.
“In Australia we are undertaking a comprehensive review of our operations and expect this would result in a workforce reduction in the order of 500.”
James Hardie
James Hardie has continued to deliver positive results, acquiring a net operating profiting of $USD86.6 million for the quarter ($130 million), marking a 17 per cent increase to its net operating profit from the previous corresponding period.
The company’s EBIT reached $USD121 million ($183 million) for the March 2020 quarter — a 21 per cent increase from the March 2019 quarter.
“We delivered strong fourth quarter results globally, capping a fiscal year of outstanding performance that demonstrated our ability to consistently execute in both growing and highly volatile markets,” James Hardie chief executive officer Jack Truong said.
“In the fourth quarter, our Asia Pacific segment delivered good financial returns with revenue up two per cent and adjusted EBIT growth of four per cent in local currency at an adjusted EBIT margin of 20.5 per cent.”
To cap off the March quarter, the company has also seen an increase to its liquidity position, which was raised from $USD464 million ($702 million) in the December 2019 quarter to $USD510 million ($771 million) in the March 2020 quarter.
“We enter fiscal year 2021 with significant momentum in both our commercial and LEAN initiatives, albeit in a rapidly evolving and highly volatile market and economy,” Truong said. “Our global team remains focused on executing our strategic plan to deliver growth above market with strong returns.”.
ADBRI (Adelaide Brighton)
ADBRI, formerly known as Adelaide Brighton, has also recorded positive results, with its trading being in line with what has been anticipated for the March 2020 quarter. Its name change aims to reflect the size of the expanding company.
The company’s March and April trading results have been in line with expectations, with demand for its cement and lime products seen predominantly in the mining sector across Western Australia, South Australia and the Northern Territory.
Demand for ADBRI’s masonry products also enjoyed a 40 per cent increase in April.
“The backyard action has definitely increased, as people tried to stay productive during home isolation,” ADBRI chief executive Nick Miller told AAP. “It’s the right time for us to step forward in terms of our evolution. We are a national player with a broad offering. We’re a very diversified business.”