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Boral recorded a 31 per cent profit increase for the first half of the 2016 fiscal year.
Boral recorded a 31 per cent profit increase for the first half of the 2016 fiscal year.

Boral weathers industry ‘period of transition’

New South Wales’ strong residential building market has helped lift Boral’s first half profits, despite the Australian construction materials sector being in a “period of transition”.

For the six months ended 31 December, 2015, Boral recorded a net profit after tax of $AUD137 million, a 31 per cent increase compared to the previous corresponding period.

Revenue fell four per cent to $AUD2.2 billion, which was said to reflect the loss of revenue from Boral’s east coast brick operations after the formation of the Boral CSR Bricks joint venture in May 2015. However, on a continuing operations basis, it was said revenue was “broadly steady”.

Boral’s earnings before interest and tax (EBIT) increased 19 per cent to $200 million with improved earnings recorded across all four of the company’s divisions.

Boral CEO and managing director Mike Kane said the positive first half results were driven by “a very strong residential construction market in NSW, a solid performance in southeast Queensland, further recovery in the US and a successful growth strategy in the gypsum business in Australia and Asia”.

“The substantially improved result is a reflection of our commitment to improve Boral’s cost base, grow our margins and respond more quickly and more efficiently to market conditions,” he added.

Division breakdown

EBIT for the construction materials and cement division increased six per cent to $AUD159 million, although revenue fell eight per cent to $AUD1.5 billion due to the decline in major project activity and the sale of Boral’s Western Landfill business in February 2015.

It was said the company’s quarries and concrete business delivered stronger earnings than the previous year, despite having lower volumes. Boral’s asphalt business, on the other hand, experienced a drop in both revenue and earnings, while revenue and earnings both increased for cement.

Boral’s building products division recorded a 15 per cent lift in EBIT and a 27 per cent fall in revenue. Excluding the impact of equity accounting from the Boral CSR Bricks joint venture, revenue increased marginally by one per cent.

Underlying EBIT and revenue both increased in Boral’s gypsum division, lifting 30 per cent and 13 per cent, respectively.

Boral’s USA division also showed improved performance in the first half, delivering a positive $AUD8 million EBIT compared with an $AUD8 million loss in the first half of 2014.

Local market influences

A Boral statement noted that in the first half, Australian residential market activity had remained at record high levels. Conversely, non-residential activity softened and materials demand from the construction of roads, highways and engineering work contracted in line with the company’s expectation.

While Boral predicted the value of work done in the roads, highways, subdivisions and bridges sector would increase in the 2016 fiscal year, it was said it was unlikely increased investment in roads and infrastructure would translate into materials demand until the end of the fiscal year. Engineering activity was also expected to continue contracting.

Kane said the Australian construction materials sector was currently in a period of transition, with many major projects – especially those associated with the slowing resources boom – winding down.

“After this period of transition in major engineering works, we expect a pick-up from major road and infrastructure projects, such as the multi-year NorthConnex project in Sydney, which Boral will commence supplying in the 2017 financial year,” Kane stated.

More reading
Construction materials help Boral profits soar
Boral restructure leads to profit increase
Brick supplier JV commences operation
Boral completes landfill business sale











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Wednesday, 18 September, 2019 9:03am
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