Boral reports H1 loss
Boral Limited (ASX:BLD) reports a first half net loss of $25.3 million, down from a net profit of $153 million in the previous corresponding period.PT0M47S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2ec5n 620 349 February 13, 2013
Construction materials group Boral has refused to provide any guidance for year to June earnings as it battles headwinds amid efforts to trim down for a more efficient future.
"Right now we're moulting, and its not pretty," the managing director and chief executive Mike Kane told analysts today, when discussing the December half results.
Boral lost 4.1 cents a share in the half, down from a profit of 20.4 cents a year earlier, in the wake of a heavy round of restructuring and redundancies - 700 head office jobs and a further number of production jobs.
Most of the head office cuts will be completed by the end of March, the company said.
Despite the loss, Boral has signalled confidence in its future, opting to pay an interim dividend of 5 cents a share, down from 7.5 cents previously.
The main drag on earnings remains buildings products such as bricks, timber and windows, along with cement. In the US, Boral is still losing money, although it is forecasting a steady recovery in housing starts which will help lift this business back to profitability.
In the US, Boral posted a loss before interest and tax of $38.7 million down from 51.5 million a year earlier, with the building products division losing $17.8 million, a reversal from the $6.3 million profit a year earlier. To revive earnings of the cement division, Boral will halt the production of clinker, an intermediate product in making cement, at Waurn Ponds in Victoria, with further changes likely.
"In cement, we will continue to be disappointed," Mr Kane told analysts. "The dynamics are changing - and changing rapidly. With import (price) parity the ceiling, a low import price out of Asia and no price leverage, the halcyon days of the past won't come back. We're taking costs out on a phased basis."
"We're on a journey. We would like a new import facility, but I don't have the balance sheet to support that."
As a result, it is looking to swapping product with competitors to compete with imports, as a first step.
Ongoing issues remain with the timber division, where the sale of several masonry units is yet to be completed, and also east coast bricks, where excess capacity continues to constrain margins.
"Building products in Australia is a work in progress," Mr Kane said.
In the December half, gypsum unit earnings in Australia were hurt by competitor pricing pressure which prompted a "short and sharp" price response from Boral.
"I think that's behind us now, Mr Kane said.
In the US, Boral anticipates housing starts this financial year will reach 860,000 units and rise to 1 million units next financial year.
Changing market conditions mean that Boral's breakeven point in the US is around 1-1.05 million units, it said.
More broadly, an ongoing concern is the prospective level of future demand once the bulk of the construction activity on a series of export gas projects in Queensland winds down from next financial year.
However, replacement projects such as the large Barangaroo redevelopment in central Sydney, the Wheatstone export gas project in Western Australia and work at Port Botany, also in Sydney, will sustain activity, analysts were told.
For the future, Boral has flagged an increased role for research and development around its existing centre in Texas, USA, while flagging new facilities in Australia and also Asia in the future.
The heavy round of job losses now underway will remove the inward focus of the group, Mr Kane said.
"We are attacking a very entrenched bureaucracy. This is completely unnecessary. Our internal focus was getting in the way (of focusing on customers)," he said.