Construction materials giant Boral (BLD) has lifted dividend after reporting a 23% jump in underlying first half profit to $112 million, thanks to stronger housing markets in the US and Australia.
The better than forecast result came despite wet weather on the East Coast of Australia during the first quarter which slowed construction in some markets, and by a slowing in spending on roads and other infrastructure.
As result, interim dividend was boosted 21% to 8.5c a share, from the same period in 2013-14.
The shares fell 1.2% to $5.7, despite the higher dividend.
BLD 1Y – Building boom boosts Boral
Cost cutting helped Boral offset the negative impact of the weather which saw the group’s construction, materials and cement division’s earnings before interest and tax cut by $5 million to $150 million for the half year.
The extensive cost cutting programs of the past 18 months and sales of unwanted property helped the construction division, but it was stronger residential housing markets in Australian US that bolstered earnings.
For the six months ended December 31, earnings before interest and tax in the building products arm increased $9 million to $14 million as stronger home building boosted sales prices and volumes.
Furthermore, after five years of losses, Boral now reckons US business will break even over the full 2014-15 year with the annualised run rate of new housing starts in the US tipped to hit between 1.1 million to 1.2 million new homes in the second half.
Boral USA reported an EBIT loss of $8 million for the half, down from $30 million a year ago, so it is looking at a second half performance of around $16 million, with help from the weaker Aussie dollar.
In a statement Boral CEO Mike Kane said the efforts to realign the company’s portfolio, cut costs, and strengthen the balance sheet were paying off and positioning the company for future growth.
"The restructuring and streamlining of Boral?s businesses that has been taking place is enabling them to be more responsive to market changes, with the half year result demonstrating an ability to leverage growth in housing markets as well as an ability to realign activities as market activity slowed in roads and infrastructure," he said in a statement yesterday.
Thanks to the weaker Aussie dollar, the company’s US denominated debt increased by $169 million, but Boral says its net debt of $887 million and gearing of 20% is remains "low".
