Boral reports increase in underlying net profit after tax

Boral reported a 23 per cent increase in net profit after tax before significant items to AUD137m (US$97m) for the six months ended 31 December 2015, reflecting improvements in margins, stronger housing activity in the US and continued strength in its home market of Australia.

Boral’s reported net profit after tax of AUD137m was 31 per cent higher than the previous corresponding period, with no significant items reported during this time.

Sales revenue from continuing operations of AUD2.2bn was in line with the prior year as higher revenues associated with housing activity in Australia and the USA offset the company’s anticipated decline in resource-based and other major project activity, including LNG projects in Queensland, Western Australia and the Northern Territory.

On a reported basis, sales revenue of AUD2.2bn was down by four per cent on the prior year, due to the impact of equity accounting for the Boral CSR Bricks joint venture, which was formed on 1 May 2015.

Earnings before interest and tax before significant items increased 19 per cent to AUD200m underpinned by higher earnings from all divisions, including a strong focus on operational cost improvements and some pricing gains.

Boral’s CEO & Managing Director, Mike Kane, said that further improvements across all divisions contributed to the significant uplift in Boral’s profit.  

“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,” Mr Kane said. “The success of the first half is underpinned 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.”

Mr Kane said the significant improvement in NPAT during the first half had come at a time when the construction materials sector in Australia is in a period of transition.

Along with the rest of the industry, Boral has felt the impact of major engineering work ending or slowing down, including LNG projects in Queensland, Western Australia and the Northern Territory, which had accounted for a two per cent decline in total concrete volumes.   

“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,” he added.

Breakdown of results

Boral’s largest division –  Construction Materials & Cement – delivered a six per cent rise in EBIT to AUD159m, assisted by AUD5m of Property earnings and a AUD4m settlement with the CFMEU.

The USG Boral gypsum joint venture delivered a 31 per cent increase in post-tax equity income to
AUD32m and a 30 per cent lift in underlying EBIT to AUD91m for the half year, with earnings growth particularly strong in Australia. The roll-out of the Sheetrock® brand plasterboard products attracted a price premium with adoption rates nearing 40 per cent in Australia, Boral said.

In the USA market recovery continued with Boral USA delivering a positive AUD8m EBIT for the first half compared with an AUD8m loss in the first half last year.

FY16 full-year expectations

Mr Kane said for the full year FY2016, Boral expected a solid performance with the following
divisional expectations:

• Construction Materials & Cement is expected to deliver a marginal improvement in EBIT compared with FY2015 (excluding property in both years). 

• Building Products is expected to deliver a marginal improvement in reported EBIT in FY16 compared to the reported EBIT for FY2015. Improvement initiatives and a continuing strong East Coast housing market should benefit the business including the Boral CSR Bricks JV. 

• Boral Gypsum should deliver further underlying performance improvements in FY16 against FY15, on the back of strong activity in Australia, penetration of Sheetrock® products, and strong cost and price discipline.

• Boral USA should report a further increase in earnings in FY16 underpinned by increased housing activity. External forecasters are projecting an increase to approximately 1.2m housing starts in FY2016.