Solid enough December half-yearly reports were released on Wednesday by two of our country’s industrial giants – the Kerry Stokes-controlled Boral and packaging leader Amcor.
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Boral (ASX: BLD) expects June half profits to be roughly in line with those in the December half.
Boral said revenue climbed 12% to $1.68 billion for the six months ended December 31.
That’s a figure adjusted to take account of the string of asset sales in 2022 both here and in the US under the Stokes interests’ control.
Proforma net profit after tax fell 91% to $89.5 million compared with $1.024 billion a year ago, when the results were bolstered by one-offs from the sale of the group’s North American building products business.
On a continuing operations basis, profits rose 15 % to $95.3 million while earnings before interest, tax, depreciation and amortisation were up 7% to $206.5 million, while Boral said its EBIT margins increased by 20 basis points to 5.7 %.
Sales volumes were up 4% in the December half and revenue was bolstered by price rises across cement, asphalt and quarrying products were the drivers for the company and its new chief executive Vik Bansal.
There’s no dividend – just as there hasn’t been a dividend for a while at another Stokes controlled company, Seven West Media which reports its interim figures next week.
Boral had to overcome a surge in energy costs in the half year – they were 54% cent higher from a year earlier – an increase of $40 million. That included higher diesel costs, liquid fuels as well as electricity and gas for the operations.
Mr Bansal, who became CEO back in October, said he had also implemented a flatter management structure and more cost disciplines and the company was headed in the right direction.
“It is promising to see our pricing actions gain traction,” he said.
Mr Bansal said cartage costs across the business also continued to rise, in part because of a driver shortage as rival industries such as grain haulers vied for workers. Cartage costs were up 20% compared with a year ago.
Kerry Stokes and his family control 72% of Boral through Seven Group Holdings, the main listed company for the family.
That tight holding is why the shares leapt nearly 13% yesterday to $3.97.
Because of the enormous changes wrought at Boral by former management and then the Stokes family, there’s one thing in this result from Boral to give us a guide as to how building and construction companies fared in the December half and that was the confirmation that energy and transport costs rose sharply and ate into margins (especially if prices could not be increased).
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Like Boral, Amcor (ASX: AMC) used higher prices to bolster its bottom line for the December period to counter inflationary cost increases, particularly in energy.
The higher prices were passed on to buyers of Amcor products and services (just as they were by Boral), which in turn had to boost the prices of their products which saw the cost increases wrought by Russia’s invasion of Ukraine become embedded across manufacturing and consumer goods sectors (and supermarkets and wholesaling as well).
Energy for Boral is a key input in running its plans and cartage operations; for Amcor it powers its factories but also is also key to the pricing of its raw materials, such as plastics of all types.
Amcor said on Wednesday that it managed to lift prices to customers by around $A1 billion in the half which went a long way to offsetting the cost pressures that prevailed across the period, especially in major markets like Australia and the US.
Amcor operates 220 factories in 43 countries making bottles, pouches and containers for food, beverages and healthcare products – a geographic and product spread that leaves it hostage at times to cost pressures.
Amcor said it managed a 10% rise in prices – or $US670 million (more than $960 million) for the December half year.
Sales rose 6% to $US7.354 billion, which was a little less than some market forecasts. Proforma earnings jumped 62% to $US691 million while adjusted EBIT rose 8% to $US791 million on a constant currency basis (and up 3% without a constant currency value comparison).
Amcor CEO Ron Delia said: “Amcor delivered strong financial performance for the first half of fiscal 2023, demonstrating excellent operating leverage amid ongoing challenges in the macroeconomic environment.”
“For the year-to-date, organic net sales growth of 2% drove an 8% increase in adjusted earnings per share on a comparable constant currency basis.
“We continue to make good progress on our commercial and strategic agenda and our teams are doing an excellent job navigating through volatile market conditions, while recovering general inflation and higher raw material costs.
“Our exposure to consumer staples and healthcare end markets positions our business well despite some softening in the demand environment and customer de-stocking through the December quarter. We also completed the sale of our Russian plants and announced a bolt-on acquisition in China to strengthen our healthcare packaging business in the Asia Pacific region.
“Notwithstanding a more cautious near-term outlook, we remain focused on executing against our strategy for long term growth.
“Our ability to generate significant annual cash flow allows us to continue to invest in multiple growth opportunities, pay an attractive and growing dividend and regularly repurchase shares,” he said in the statement on Wednesday.
For the December quarter, Amcor reported net sales of $US3,642 million up 4% on a reported basis, “which includes an unfavorable impact of 5% related to movements in foreign currency exchange rates and price increases of approximately $US270 million (representing 8% growth) related to the pass through of higher raw material costs. Items affecting comparability had no material impact on net sales.”
Net sales on a comparable constant currency basis were 1% higher than the same quarter last year reflecting price/mix benefits of approximately 3%, partly offset by approximately 2% lower volumes.
Net Income was $US459 million and includes a $US215 million gain on the sale of the business in Russia. Adjusted EBIT of $399 million was 7% higher than the same quarter last year on a comparable constant currency basis, Amcor said.
Amcor securities fell more than 3% to $A16.70 on the ASX. That’s despite the company lifting its current buyback ($US400 million) by $US100 million and boosting December quarter dividend to 12.25 US cents from 12 US cents for the year ago 4th quarter.
Amcor said that the holders of CDIs trading on the ASX will receive an unfranked dividend of 17.30 Australian cents per share, which reflects the quarterly dividend of 12.25 US cents per share converted at an AUD:USD average exchange rate of 0.7082 over the five trading days ended February 3, 2023.
