Boral Ltd (BLD), Australia’s biggest construction materials and building products group, has joined the share buyback club with a plan to repurchase up to $236 million of its shares over the next year.
The company told the ASX yesterday it intends to buy back up to 5% of its issued capital, or 39 million shares, on-market over the next 12 months.
The news sent the shares up on the ASX yesterday – they closed up 1.6% at $6.12.
BLD 1Y – Boral launches $236m share buyback
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In doing so the company joins a long list of companies with buybacks promised or about to get underway: from Rio Tinto to Fairfax Media, Seven Group Holdings, Amcor and Orica.
It can be a tax-effective way of handing money back to shareholders.
In the case of Boral, profits are rising, thanks to the weaker Aussie dollar, the Australian home building boom and an improvement in the performance of the company’s troubled US operations.
And the company’s net debt was just $87 million at the end of the first half, giving Boral ample room to buy back the shares and pay for them out of cash flows.
The company sold off half of its plasterboard operations in Australia and parts of Asia, which has allowed debt to be reduced.
For that reason another acquisition has been suggested by eager broking analysts, but it would seem that giving money back to shareholders has won out for the time being.
"This buyback reflects Boral’s commitment to effective capital management and delivering improved returns to shareholders," Boral chief executive Mike Kane said.
"At the same time we are maintaining flexibility to respond to changes in market conditions and to take advantage of appropriate growth opportunities that may present in the future,” Mr Kane said.
