Cement and lime producer, Adelaide Brighton Ltd says it is seeing weaker demand for its products but has maintained projections for a fall in sales this year, despite the upturn in housing construction.
The slump in mining and resources and a slow start to infrastructure stimulatory spending by state and federal Governments, seem to be the reasons for the fall.
Adelaide Brighton posted a 6.1% rise in annual net profit in the 2008 financial year to $120.8 million, but forecast cement sales to decline by about 10% in 2009.
(Those lowered project numbers from ABARE won’t be good for the likes of Adelaide and Brighton either)
(The company has a financial year that ends December 31.)
Managing director Mark Chellew told the company’s annual general meeting yesterday cement sales had fallen by about 8% in the year to date.
"Driven by weakening in the commercial sector, year to date cement demand is approximately eight per cent below prior year," he said.
"This shortfall is being met through reduced imports."
Flexibility in imports ensures the company’s core cement kilns continue to operate at capacity, Mr Chellew said.
"Turning to 2009, the construction industry is facing its first recessionary cycle in a decade.
"Looking at past patterns of demand, cement volumes have fallen by between 10% and 20% over the duration of the cycle. Given the magnitude of the global recession it is possible that demand may weaken towards the top end of this range over the next eighteen months," he said.
Demand for lime has also fallen, despite sustained demand from the alumina and gold sectors, he said.
"At this stage we are predicting 2009 lime demand to fall by circa two per cent to three per cent due to the weakness in the non alumina sector," Mr Chellew said.
He said the residential construction sector was benefiting from a boosted first home owners grant, while federal government spending on infrastructure is likely to begin to have a material impact in the final quarter of this year.
Adelaide Brighton is looking for $15 million of cost reductions in 2009, but the $81 million acquisition of Hanson Building Products Pty Ltd in 2008 hasn’t paid off, with a significantly weaker Queensland construction market cutting returns.
"While the acquisition met its financial targets in 2008, the rapid decline in the Queensland market in the second half year has directly impacted 2009 earnings," Mr Chellew said.
"As a result the division has implemented further restructuring initiatives in order to maximise profit, though target acquisition returns will not be achieved until demand recovers in its core markets.
"With regard to our financing costs, interest expense will decrease by in excess of $10 million during 2009 as a result of reduced borrowings and the decrease in the underlying cash rate.
"Adelaide Brighton does not hedge its interest rate risk and takes an almost immediate benefit from the reductions in the cash rate.
"Based on the above outlook, the Company expects net profit after tax to be within the range of $105 million to $115 million for 2009," Mr Chellew told the meeting.
That would be between $5 million and $15 million under the 2008 figure.
Natural gas distributor, Envestra has increased its forecast profit for the fiscal year 2009 by around 15%, or $50 million.
Envestra told the ASX yesterday that it now expected profit after tax for 2009 to be at least $35 million, up $5 million on guidance provided on February 26.
"The latest forecast profit increase is due mainly to:
"Lower borrowing costs resulting from the repayment of debt using proceeds from the Company’s recent $111 million Rights Issue;
"Higher than expected revenue from special network services, including mains relocation and network extensions; and
"Tax credits arising from the Federal Government’s Investment Allowance passed in the Senate last week.
"The full-year result is subject to weather conditions over the remainder of the year, and any other unforeseen circumstances."
The company’s shares eased one cent to 43c.
APN News & Media raised $83 million through a new share sale to institutional investors.
That was a bit more than the $79 million APN was expecting from the top end of the market.
APN said it still aims to raise a total $99 million from institutional and retail shareholders.
The shares rose 4c to $1.23. They had closed at $1.16 before the trading halt.
APN CEO, Brendan Hopkins, said in a statement to the ASX that: "We are pleased with the positive response from our existing institutional shareholders and we thank them for their continued support.
"This successful equity raising places APN in a much stronger capital position, which as noted at the AGM is a key focus for the Board in the current climate of uncertain economic and market conditions."
The entitlement offer gives retail shareholders the opportunity to buy one new share for $1 for every five they already own.
The retail portion of the entitlement offer will raise about $16 million. It is due to open on May 28 and close on June 15.
But Hastie Group wasn’t so successful in winning the market favour, despite raising close to $60 million in an institutional equity raising.
The industrial building services and refrigeration company said yesterday the fully underwritten institutional component of its offer raised approximately $59.7 million.
The company conducted an instit
