Shares in building products group, Boral were crunched yesterday by investors tired of the excuses for poor performance from management and the board, especially in Australia.
The shares lost more than 20% of their value at one stage yesterday as investors sold out after the company revealed a 7% dip in profit (which missed market forecasts) and some acquisitions (worth over $650 million) which were hard for investors to judge.
The Boral share price crashed 12.3% in early trade to $4.35 after the results and other announcements were made before the ASX opened.
The shares continued to weaken through the rest of the session and ended at multi-year lows around $3.94 – down 20.56%. That was just above the low of $3.93 which was the lowest the shares have been for more than ten and a half years.
That compares to the 52-week high of $7 a share 51 weeks ago at the end of August 2018. Yesterday’s close was the lowest since January 2009 – at the depths of the GFC.
The big fall wasn’t so much a reaction to the weak 2018-19 result or the corporate activity but to the very weak outlook while a cut in the final dividend to 13.5 Australian cents a share, down from 14 cents last year didn’t help sentiment.
That left total dividend for the year steady at 26.5 cents a share, a level that will be under pressure this financial year if the forecast slide in earnings happens.
Boral is Australia’s largest building materials group told the ASX that underlying net profit for the year ended June 30 slumped 7.0% to $440.1 million as domestic construction slowed amid strain on Australia’s housing market, dragging down a better result in its US division.
That was well under market forecasts for a result around $476 million. Revenue was roughly in line with the previous financial year at $5.86 billion.
Boral is forecasting a 5% to 15% drop in net profit for the current financial year due to pressure from its Australian businesses to be offset by further growth in the US, thanks in part to around US$20 million in targeted cost cuts from its Headwaters operation.
“In FY2020, we expect downward earnings pressure in Boral Australia as the slowdown in residential construction continues to impact and won’t be fully offset by growing volumes in infrastructure projects,” chief executive Mike Kane said in a statement on Monday.
Boral is also expanding a joint venture with Knauf to expand its business in Asia.
Boral will buy back the German company’s 50% stake in USG Boral Australia and New Zealand, returning the local business to full Boral control.
Boral is also expanding a joint venture with Knauf to expand its business in Asia. The two-stage deal will cost Boral $US441 million ($A650 million).
