Building materials group Boral is looking for continued sales and profit growth in the US and Australia over the next year after both regions helped the company report another year of solid earnings.
Boral yesterday reported a 16% jump in full-year profit to $296.9 million, helped by the high level of construction activity in Australia and improved earnings from its US operations.
The company will pay a 50% franked final dividend of 12 cents per share, up half a cent from a fully franked payout a year ago. That makes a full year payout of 24 cents a share, up from 22.5 cents in 2015-16.
Excluding significant items, profit for the year to June 30 rose 28% to $343 million, while revenue was up 1.8% to $4.4 billion, indicating the company was able to fatten profit margins during the year.
The company said its expecting Boral Australiad to deliver higher earnings in the currency financial year with the result broadly balanced between the two halves of the year, while the joint venture,USG Boral’s earnings growth is likely to be in the high single digits.
And the company’s North Americas business is forecasting significant growth in earnings before interest and tax , driven primarily by a full-year contribution from Headwaters, cost cuts of $US30-35 million ($A38-44 million), and continued steady market growth.
CEO Mike Kane said Boral had continued to deliver strong earnings growth while undergoing a major transformation with the Headwaters acquisition.
"The increase in EBIT (earnings before interest and tax) reflects Boral’s high- performing business in Australia, supplying continued strong east coast residential markets as well as growing infrastructure volumes linked to major public sector spending," he said.
Earnings in the company’s largest division, Boral Australia, rose 11% to $349 million, while the USG Boral joint venture delivered an 18% increase in post-tax earnings to $70 million. But there’s an issue to watch here – the impact of North Korea’s rocket madness and other instability on the South Korean economy where the joint venture gets more than 23% of its business a year.
The newly formed North America division, which includes Boral USA as well as recently acquired building products supplier Headwaters, saw a 50% jump in earnings to $66 million.
In a briefing after the release of the results, Mr Kane forecast that Australia’s infrastructure boom will last for up to 10 years and prove to be an even bigger profit driver for the company, as the pace of the dwelling investment boom slows.
"The infrastructure boom is on us right now," Mr Kane said on Wednesday. He has had to revamp his own view on the future strength of the Australian infrastructure pipeline and extended it from his previous timeline of five to six years, out to seven to 10 years. He said the slowing pace of activity in housing was gradual and the overall market was still very robust. "It’s moderating, but it;’s moderating at a very slow rate," he said.
And besides the question over South Korea, the impact of Hurricane Harvey and its record rains on southern Texas was another unknown for Boral.
Mr Kane said Boral generates about 25% of its US earnings from Texas, there will be a short-term blip from the severe flooding around Houston in the wake of Harvey.
"We have a few plants that are shuttered in the impact area," Mr Kane said. It was too early to tell what the short-term impact would be on profits. "It’s very difficult for us to tell," he said.
The shares ended down 3% at $6.63.
