Australia: Boral has reported a 59% fall in second-half profit, hit by weak housing construction in Australia and delays in big resource and road projects. Boral, which removed its chief executive in May 2012, declined to give a fiscal forecast for the year ahead in light of uncertain market conditions, but said it would update investors at its annual meeting in November 2012.
Boral's net profit for the six months to June 2012 fell to US$35.7m from US$87m a year earlier, as calculated from full year figures. The building products maker issued profit warnings in April 2012 and June 2012.
"Earnings from our Australian business in the six months to June were hit by very weak housing and non-residential building activity, combined with delays and disruption from sustained rainfall across the east coast. The positive impact of price increases was more than offset by much weaker sales volumes in these markets and by higher costs, including from the wet weather," said Boral's chief executive officer, Ross Batstone.
Overall for the year to 30 June 2012 profit, after tax dropped by 42% to US$106m from US$183m. Sales revenue grew by 5%, to US$5.24bn from US$4.94bn, but this excludes the impact of the acquisition of Lafarge's 50% of Boral's stake in their Asian plasterboard joint-venture.
Boral's Building Products division reported a 11% fall in revenue for wallboard, to US$368m from US$413m. Sales volumes declined year-on-year by 14%. Overall for the division earnings before interest, taxes, depreciation and amortisation (EBITDA) fell by 46% to US$74.2m from US$138m. The company attributed the decline to the fall in Australian housing which began in year to 30 June 2011 but fell rapidly again in the second half of the 2012 fiscal year, and wet weather. Price increases, which averaged around 2-3% were insufficient to offset the significant impact of lower volumes.
Plasterboard Asia reported a revenue of US$317m since 9 December 2011, when Boral acquired the rest of the joint-venture from Lafarge. Revenues in Indonesia, Thailand and South Korea grew whilst income was below expectations in China, due to a slow-down in construction activity there.
Wallboard capacity increased throughout the year in China with the acquisition of a 35MM2 plant in Shandong and on-going upgrade work increasing capacity from 13MM2 to 43MM2 in Chongqing. In Indonesia a 30MM2 capacity upgrade is currently scheduled in completion for early 2013 and in Vietnam, a 30MM2 upgrade in Ho Chi Minh City plant is progessing in line with expectations but with no given completion date.
For its 2013 outlook Boral expects continued weak housing demand, particularly for the first half of the 2013 fiscal year, to prove challenging for its Building Products division. It added that further interest rate reductions and/or improved consumer 'sentiment' are required for demand to lift in the six months ending June 2013. In Asia, continued growth in construction activity is expected together with more penetration by wallboard. While the residential market remains subdued in China, Boral's plant in Shandong will see growth of sales volumes in new high-end markets in Beijing, Tianjing and Shandong.
