AdBri 1H net profit falls, revenue edges ahead

Adelaide Brighton reported a 3.9 per cent rise in first-half revenue to AUD602m, as improved pricing and increased cement from the residential sector on the eastern seaboard offset a decline in project volumes in South Australia and a reduction in lime sales volumes.

The company reported a net profit for the half year ended 30 June 2014 of AUD51.2m, down 15.9 per cent compared to the same period of last year. Adjusting for significant items, underlying net profit of AUD61.2m was 2.9 per cent lower YoY.

EBIT fell 12.6 per cent to AUD78.3m as first-half earnings were impacted by significant one-off items totalling AUD14.2m including the rationalisation of clinker production at the Munster works in Western Australia, corporate restructuring cots and acquisition-related spending.  Underlying EBIT of AUD92.5m was in line with the prior year. The underlying EBIT margin declined from 16 per cent to 15.4 per cent YoY due to higher input costs, particularly energy, and a reduction in contribution from joint ventures due to weakening demand in some downstream markets.

Overall cement and clinker sales volumes decreased by 1.9 per cent YoY. Overall sales volumes to major resources and infrastructure projects in West Australia, South Australia and Northern Territory were similar to the comparative period of last year.

The company noted that sales volumes improved in New South Wales and Queensland driven by a residential recovery and in the Northern Territory due to increased demand in the resources sector. Shipments to Victoria were down due to “market weakness and competitive pressures,” according to AdBri. Sales to major resource projects in Western Australia were stable, despite delays due to high rainfall in the early months of the year.

Cement margins improved as a result of improved pricing and Munster rationalisation measures. “These more than offset the impact of operational issues during April and May at the Birkenhead (South Australia) clinker kiln,” AdBri noted.

The production of ‘general purpose’ clinker ceased at the Munster works in February 2014 and ongoing output is restricted to speciality clinker. Subject to regulatory and supply chain arrangements being in place, clinker production at Munster will cease by year-end.

Major planned maintenance during 1H14 and production issue at Birkenhead resulted in a reduction of around 500,000t of production, negatively impacting pretax earnings by around AUD4m. The issues were fully resolved in the first-half.