Gypsum industry news
Australia: Boral's revenue from its gypsum wallboard join venture, USG Boral, has risen by 2% year-on-year to US$566m in the first half of its financial year, which ended on 31 December 2016, from US$552m in the same period in 2015. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 18% to US$116m from US$98.5m. It attributed the sales growth to growth in its Sheetrock plasterboard product. The on-going rollout of Sheetrock is scheduled to continue until the end of 2017. Regionally, sales growth in South Korea, Australia and Thailand offset a declining market in China.
The building materials company added that its joint venture had started building a new warehouse at its USG Boral's Dangjin facility in South Korea in the reporting period. The upgrade at the site is intended to add incremental capacity and support the longer-term addition of at least 30Mm2/yr of plasterboard production capacity at the site, which has existing capacity to produce around 70Mm2/yr. The investment will be self-funded through the joint venture.
Overall, Boral's sales revenue fell by 5% to US$1.6bn from US$1.68bn. However, its profit after tax rose by 9% to US$114m from US$105m. It attributed this to a 'solid' performance in Australia combined with good earnings from Boral USA and USG Boral.
Australia: Boral's profit after tax has risen by 8% year-on-year to US$204m in its financial year which ended on 30 June 2016 from US$190m in the previous year. Its sales revenue fell, by 2% to US$3.28bn, but revenue from continuing operations rose slightly. Revenue from continuing operations benefitted from stronger residential activity in Australia and the US, which offset the decline in resource-based and other major project activity. The company's earnings before interest and tax (EBIT) also rose due to operational cost improvements, lower fuel costs and some pricing gains.
"We have continued to improve our performance across our businesses in line with our strategy, managing our portfolio more efficiently and maintaining a strong balance sheet," said CEO and managing director Mike Kane. "The continued growth in Boral's earnings demonstrates the great work that has been done to improve our cost base, grow margins, and efficiently supply market demand, which continues to be strong in Australia and Asia, and is growing in the US."
The group's joint-venture with USG, USG Boral, saw its revenue rise by 10% to US$1.06bn from US$965m. This was attributed to growth in Sheetrock product
wallboard sales resulting in higher pricing, and growth in adjacent product (non-board) sales. Strong volume growth in Australia was offset by contraction in key Asian markets and price competition in South Korea. EBIT increased by 27% to US$136m from US$107m.
Australia: Boral's profit after tax has grown by 23% year-on-year to US$97.2m in the first half of its 2016 financial year. It reported a profit of US$80m for the same period in its 2015 period. It attributed the growth to a strong residential market and growth in New South Wales (NSW) with cost cutting, price rises and slightly higher property earnings for its construction materials and cement business. Overall revenue fell by 4% year-on-year to US$1.6bn.
"The success of the first half is underpinned by a very strong residential construction market in NSW, a solid performance in South-East Queensland, further recovery in the US and a successful growth strategy in the gypsum business in Australia and Asia," said Boral CEO and Managing Director Mike Kane.
Boral's gypsum business reported a 13% rise in revenue to US$505m. This was attributed to increased penetration of Sheetrock brand wallboard, resulting in higher overall pricing, and stronger non-board sales. Strong volume growth in Australia was offset by contraction in key Asian markets and a reversal of a short-term market share gain in South Korea.
Australasia: LafargeHolcim has said that, despite what has been reported recently in the media, its Australian and New Zealand operations are not for sale.
LafargeHolcim recently announced a plan to divest almost US$5bn of assets in 2016 after posting unexpectedly weak third-quarter results. Speculation had emerged that it might exit from the Australasia region.
However, according to local media, an internal email sent to staff on 30 November 2015, Holcim Australia Chief Executive Mark Campbell said the company was 'not currently being sold,' but could not rule out an exit in the long term.
"I have checked whether the LafargeHolcim group had made a decision to sell the businesses in Australia and New Zealand and started a sale process without my knowledge and the answer I have received is 'no,'" said Campbell. "That said, organisations change focus over time and it is impossible to say that we will always be part of the LafargeHolcim group."
Australian-listed rivals, including Boral, Fletcher Building and Adelaide Brighton, are seen as potential acquirers, should the multinational giant choose to sell off its local arm. Ireland's CRH may also be interested. However, Morgan Stanley said that many of LafargeHolcim's local competitors might run into competition issues, given that the market is concentrated among several large players. "Should Adelaide Brighton fully participate, we cannot rule out that the 50% share in Cement Australia would be divested due to Australian regulations, given Adelaide Brighton's already strong share in cement," said Morgan Stanley Analyst James Rutledge. "While we think Fletcher Building is unlikely to be in a position to participate in industry consolidation, a change in owner that was less integrated into the region may be a positive for Fletcher Building at the margin," said Rutledge. "Given Boral's strong share in aggregates and the concrete market, we believe it will be difficult to participate in industry consolidation."
While Lafarge has a limited local presence in Australia and New Zealand, Holcim bought a string of Australian assets from Mexico's Cemex in 2009 for US$2bn and now boasts more than 350 sites nationwide.
Australia: Boral has recorded an increase in full-year profit, buoyed by the return to profitability of its US business for the first time since 2007, a pick-up in local demand and cost-cutting initiatives.
Australia's largest building materials provider posted a net profit of US$183m in the year to 30 June 2015, a 48.3% increase on the previous year's US$123m. Underlying profit rose by 45% to US$178m. However, Boral's total revenue over the same period fell by 15.2% to US$3.15bn.
Boral chief executive Mike Kane said that the results reflected the benefits from the company's overhaul of its business which reduced the size of its workforce and resulted in the closure of some unprofitable operations. "We've improved Boral's cost base, strengthened the balance sheet and we are managing our portfolio of businesses more efficiently," he said.
In the current 2016 fiscal year, Boral said it will focus on maintaining underlying earnings from construction, materials and cement, while property earnings remain uncertain. Building products are seen remaining broadly steady, while USGBoral will deliver further underlying improvement.
Australia: Boral will repurchase up to US$182m of its shares after a string of divestments bolstered the company's balance sheet. It intends to buy back up to 5%, or about 39 million shares, of its issued capital on-market over the next 12 months.
Boral chief executive Mike Kane said that the completion of a number of transactions, including the US$127m sale of its Western Landfill business in Melbourne to Transpacific Industries, had allowed for the share repurchase.
"This buyback reflects Boral's commitment to efficient capital management and delivering improved returns to shareholders," said Kane. "At the same time, we are maintaining flexibility to respond to changes in market conditions and to take advantage of appropriate growth opportunities that may present in the future." Kane had already flagged acquisitions in Asia and North America and said that Boral was too unbalanced towards Australia.
Boral received US$500m as part of an agreement with USG Corporation to sell half of its Australasian wallboard assets into a joint venture. It is on target to receive further performance-based payments of up to US$57.7m over the next three years.
Boral was reportedly considering a sell-off of its building products division, but indicated it would instead look for savings through cost-reduction programs and joint ventures. A brickmaking joint venture with CSR will proceed after receiving approval from the Australian Competition & Consumer Commission, with the expectation of savings of between US$5.39 – 7.69m between Boral and CSR.
Australia: Boral has reported a first-half 2015 profit of US$81.1m, benefiting from a recent overhaul of its business, a pickup in Australian demand for home-building products and a deeper push into Asian markets. Boral had reported a net loss of US$20.2m in the same period of 2014, as earnings were weighed down by asset write-downs.
Boral returned to profit in the second half of the 2014 fiscal year that ended on 31 June 2014, as it reaped the benefits from the earlier restructuring that reduced the size of its workforce and resulted in the closure of some unprofitable operations. "The restructuring and streamlining of Boral's businesses that has been taking place is enabling it to be more responsive to market changes," said chief executive Mike Kane.
Boral said that activity in the Australian housing market, which accounts for about 28% of total revenue, continued to gain pace during the period. A nascent housing recovery is underway in Australia, fuelled by record-low interest rates and demand from investors in major cities like Sydney. It is helping Boral to recover from several tough years, despite uncertainty about the outlook for the economy as a decade-long mining-investment boom slows. While the number of Australian home-building permits slipped by 3.3% month-on-month in December 2014, according to the latest government data, it followed a 7.7% rise in November 2014 from October 2014 and an 11.9% rise in October 2014 from September 2014.
Boral said that appetite for its products in other markets was also rising. It highlighted stronger gypsum demand in Korea and Thailand in particular, although it said that demand in China, where the property market is cooling, was subdued. In the US, Boral said that it was now seeing the benefits from a housing-market rebound and its own moves to restructure the business. The company said that it expects earnings to be 'broadly break-even' in the full 2015 fiscal year after considerable losses in recent years.
Australia: A wet winter has delayed construction activity in key east coast markets as New South Wales experienced its wettest August in 16 years. Boral's CEO Mike Kane has told shareholders that more heavy rain could buffet earnings in its construction, materials and cement division during the rest of 2014 and 2015.
"Expectations could be dampened if we are unable to realise potential property sales and some level of price increase in this very competitive market and if we experience extended periods of adverse weather," said Kane. However, he added that Boral expected to more than double earnings in its building products division in 2014 and 2015, which made US$8m in earnings before interest and tax in the 2013 – 2014 financial year. Kane said that rising energy and labour costs remained a concern across the group.
Chairman Bob Every said that Boral expects a resources industry slowdown, particularly in Queensland. "We are expecting continued softening in roads and infrastructure activity for most of fiscal 2015 before a solid multi-year pick-up from fiscal year 2016," said Every.
"In our 2015 financial year we continue to expect ongoing strong results from construction materials and cement, improvements from both the building products and Boral USA divisions and improvements in the underlying USG Boral business," said Kane. "We anticipate return on funds employed to improve, despite the shift to equity accounting on Boral's 50% interest in the Gypsum joint venture." Boral made a net profit of US$173m in ist 2014 financial year, an improvement on a US$212m loss suffered during the previous financial year.
Every also announced his intention to stand down in 2016: "I was re-elected by shareholders at Boral's annual general meeting last year and at the time I intended that, if I was re-elected, that this would be my last term on the board. My intentions are unchanged. Therefore, I will not stand for re-election in 2016. I will work with the board to identify the best possible candidate for a successor for the role of chairman and I will help to ensure an orderly transition process."
Australia: Building materials supplier Boral says that its prospects are improving as government infrastructure spending increases and industrial turmoil recedes. "After reporting lower earnings for two years running, we have clearly turned the corner," said Boral's chief executive Mike Kane.
Boral swung to an annual net profit after tax of US$161m in the financial year ending 30 June 2014, bouncing back from a US$192m net loss in the financial year ending 30 June 2013. The full-year result showed market conditions had improved across all of its divisions in Australia, the US and Asia.
Kane also expressed confidence in the American USG-Boral joint venture, which will soon launch a new lightweight gypsum board into 12 markets across Australia, Asia and the Middle East.
Australia: Boral chief executive Mike Kane said that coal seam gas is critical to the future of Australian manufacturing as he warned that rising energy costs are threatening to kill the industry. The US executive has only been running Australia's Boral for about 18 months, but he has already slashed 1000 jobs and cut US$95.5m from the company's cost base.
Kane still has costs firmly in focus, saying that spiralling energy costs are seriously damaging manufacturers. "Coal seam gas is part of the future recovery for Australian manufacturing," he said. "If it is not exploited properly, I think Australian manufacturing has a use-by date attached to it because the inflationary pressures in energy will kill domestic manufacturing over time."
Gas and electricity costs Boral about US$91.1m/yr. The group's newly-signed contracts in New South Wales and Victoria will see Boral's cost of gas rise about 20% from 2014. Because of import parity pricing, it is difficult for Boral and its competitors to pass cost increases on to customers. However, Kane is testing the waters. At its half-year result in February 2014, when Boral reported a 73% jump in underlying half-year profit to US$82.4m, the company flagged its intent to raise concrete prices by 6% in April 2014.
Over the past decade the strong Australian Dollar, high wages, rising energy costs and static productivity have taken their toll on manufacturers. "The Australian economy is showing signs of recovery but it is still early days. Not all of the states are reaching the same rate so I would argue that Queensland, Victoria and South Australia still have a while to come," Kane said.