The dismemberment of the underperforming building products giant, Boral, has started with the sale of its plasterboard businesses to its partner for more than $A1.4 billion.
Boral announced ahead of yesterday’s AGM (and to the virtual meeting) that it would selling the 50% stake in its international plasterboard business to joint venture partner Knauf.
The transaction is expected to close in the current financial year and will deliver Boral a profit before tax of about $540 million which would be used to reduce net debt and fund growth in its remaining portfolio.
The news saw Boral shares edge up 0.2% to $4.74 on a day when it was one of only seven ASX 200 companies to rise as the wider market slumped 1.7%.
Boral shares were up more than 4% in early trading after the update, but the slide in the wider market dragged it back.
The business to be sold, known as the USG Boral joint venture with Knauf, includes plasterboard businesses in Australia, Asia, New Zealand, and the Middle East.
“USG Boral is a great business, and very well positioned to perform strongly under the ownership of Knauf. The strength of the joint venture business and its prospects are fully reflected in the sale price as demonstrated by the attractive premium, which is a great outcome for Boral shareholders,” Boral’s newish CEO Zlatko Todorcevski said in a statement to the ASX and then told shareholders.
“The sale of Boral’s interest in USG Boral to Knauf will be a step to simplifying Boral’s geographic footprint and product portfolio,” he said.
Some investors reckon the sale means more assets – especially in the US – will go and there were media claims the company has received offers for some assets.
But markets now fear the latest wave of COVID-19 infections will sop America’s economic recovery in its tracks in the next month or so.
CEO Zlatko Todorcevski has promised there will be no “fire sale” of its US assets even after the group took a $1.2 billion write-down of its Meridian Brick business. So any divestments in that market will have to wait till 2021.
Boral AGM also heard a better September quarter update.
On the one hand, group revenue fell 9% over the September quarter of last year but earnings before interest and tax (EBIT) margins expanded to 9.5% from around 9%.
This meant group EBIT declined a more modest 5% over the first quarter of 2019-20.
This trend was consistent through all Boral’s divisions. Boral Australia reported September quarter EBIT that was steady despite a drop in concrete, quarry, and asphalt volumes.
Boral North America and USG Boral recorded slight increases in EBIT margins too. USG Boral is of course being removed from the company through the sale to Knauf.
The meeting heard that group debt fell to $1.956 billion at the end of September from 42.22 billion at the end of June. That was before the USG sale.
