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Lockdown losses continue to bite, Boral says



Boral has turned difficult economic circumstances into a positive for its balance sheet, after sales of USG Boral and Midland Brick in the 2021 financial year (FY2021) contributed to a profit of $640 million.

The profit came in comparison to the previous financial year’s $1.145 billion loss, which included impairment charges in part incurred because of construction declines as COVID-19 took hold. Boral’s underlying profit after tax of $251 million, excluding the significant items of divestment profits this year and impairments in the prior year, was up 44%.

Boral chief executive officer and managing director Zlatko Todorcevski said the company’s plan to reshape the business and focus on the core Australian construction materials business was on track.

Earnings from the core Australian business, excluding property, of $157m was up 11%, despite revenue being down 6%.

“We have made substantial progress in our strategy to transform Boral into a stronger, better performing, more customer-focused organisation, with a core portfolio of businesses that deliver value throughout the cycle,” Todorcevski said.

“Over the past year, we have progressed the divestments of several non-core assets, including completing the divestment of our interest in the USG Boral JV (joint venture) and announcing the sale of North America Building Products, achieving sale prices well above expectation.”

Despite the positive ground Boral has made up – reducing its net debt to $899 million, down from $2.58 billion at 30 June, 2020 – Todorcevski has indicated ongoing COVID-19 lockdowns will continue to wreak havoc on the construction materials industry.

“Where we can, we are taking actions to minimise the financial impacts of COVID-related measures, including short-term cost measures,” he said.

“We expect that FY2022 market conditions will be mixed. Infrastructure activity, particularly road construction, is expected to improve slightly in the second half of FY2022 and moving into FY2023.

“Overall, our turnaround strategy is delivering results at a time of major challenges not just for Boral but the construction sector and the broader economy.”

The Boral CEO said the September quarter of 2021 would likely see a $50 million EBIT impact for Boral as a result of COVID lockdowns and restrictions in Australia, while the July quarter had already cost about $16 million.

“Frankly, what we’ve seen since mid-July has not been helpful,” he told the Australian Financial Review in relation to ongoing lockdowns.

“It’s always easy to turn off the tap of construction, but it’s a very, very slow ramp-up once you re-open that gate.”

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