Struggling US and Australian building supplies company Boral has given shareholders the bad news early about its weak financial state.
First up net profit for the year to June is estimated to be down more than 50%, with big falls in other profit measures.
As a result of the bad news, there’s no final dividend for shareholders, although they still received a 9.5 cents a share interim in April.
That’s a long way from the 26.5 cents paid for 2018-19.
The company reports its 2019-29 results on Friday, the second last day of the period, but ahead of that release it revealed a billion-plus loss from weak operations here and in the US and write-downs of asset values in both countries.
The company changed CEOs during the first half and yesterday’s announcement has the hint of a deck clearing in the accounts by the new broom.
The problem for shareholders is that COVID-19 is not the main reason for the company’s problems. Former CEO Mike Kane stepped down before the pandemic hit hard because of operational problems in the US and parts of the Australian businesses.
If you like yesterday’s statement and Friday’s full report will see a financial cost of his Kane’s nine years at Boral.
Boral revealed $1.35 billion of non-cash impairments relating mostly to its North American operations, blaming COVID-19’s impact on economic activity, housing, and the recent performance of its businesses.
Boral said $1.22 billion of the write-down related to its North America operations including the impairment of goodwill, intangible assets and its investment in the Meridian Brick joint venture.
Citing blamed weaker economic activity in North America due to COVID-19 and future economic risks from the pandemic, Boral has cut forecasts for housing repair and renovations in the region, cutting housing start estimates from 1.5 million to 1.3 million. The company also lowered its terminal growth rate for the business from 2.5% to 2%.
The remaining $123 million of write-downs relates to Boral’s Australian building products and construction materials businesses.
Boral said this was due to a range of factors including a significant decline in housing construction, especially in NSW, a slower than expected pace of infrastructure activity, the impact of bushfires on its timber business and general uncertainty regarding the extent of the economic damage caused by COVID-19.
Boral told the ASX that net profit after tax, but before significant items would be about $175 million to $180 million. That’s down by more than 50% from 2018-19’s $440 million
EBITDA (earnings before interest, tax, depreciation and amortisation) before significant items will be about $820 million to $825 million, down more than 20% on the $1.037 billion reported for the June, 2019 financial year.
Boral shares rose 0.5% to $3.68.
