Call it bad news Friday, when a string of earnings downgrades were issued by companies large and small at annual meetings, or ahead of meetings in coming weeks.
It was a smaller version of the spate of bad news on global markets Friday night that saw cars, banks and retailers downgrade earnings and production levels in the US, Europe and Asia.
Boral Ltd shareholders at Friday’s annual meeting in Sydney knocked back the company’s remuneration report for the year as a sort of ‘punishment’ for more bad news on earnings.
After a couple of downgrades in 2008, 2009 was always going to be tough.
The vote went against accepting the remuneration report, but that was largely symbolic.
But it’s clear shareholders are not happy with the money being paid to CEO Rod Pearse
Friday’s AGM heard an update that said full-year earnings may fall 18% or more as US housing starts slump and profit at home will be "significantly” less than a year ago.
Net income may fall to around A$200 million ($134 million) in the year ending June 30 if the Australian dollar averages about 70 USc for the period, Sydney-based Boral said today in a statement to the Australian Stock Exchange. The company reported profit of A$242.8 million in fiscal 2008.
Seeing the Australian business contributed 96% of earnings in 2008, any further weakness here would have a dramatic impact, and that’s what happened, especially after this statement in August with that 2008 profit announcement that seemed to suggest better returns were possible seen.
“We expect that in Australia we will see a further lift in Construction Materials earnings and Building Products will be broadly steady.
“In the USA, increased benefits from structured cost reduction programs will be delivered but we expect US earnings to decline further with housing starts of around 900,000 compared with 1.13 million in FY2008.
"We expect continued competitive market conditions and input cost pressures in Asia, particularly in Construction Materials. We will provide an update on trading conditions at the AGM on 24 October 2008.” CEO Rod Pearse said in the 2008 profit announcement in August.
So Boral has now forecast that profit will drop for a fifth straight year to its lowest since 2002.
Not helping is the credit crunch, as Mr Pearse explained on Friday:
"We are seeing an increased rate of deferrals for some large non-housing projects in Australia including commercial, industrial, and multi-residential buildings. This is a reflection of tighter credit and higher borrowing costs."
"The first home buyers boost from the Federal Government isn’t expected to see any impact at Boral until well into next year.
"Construction materials profits in Australia for the September quarter were above the prior year. We expect this trend to continue during FY2009. The improved construction materials result has been driven by stronger prices and by effective operational improvement initiatives; concrete market volumes are broadly comparable with last year. Concrete and quarry prices have lifted well year-on-year as the April and August 2008 price increases flow through.
"Cement price increases were effectively implemented on the east coast in August and September and cement and lime volumes are up on the prior year.
"Australian dwelling starts weakened to an annualised rate of around 145,000 starts in the September quarter and the performance of our Australian building products businesses was well below the prior year.
"Reducing interest rates and improvements announced in October 2008 to the First Home Owners Grant will over time significantly improve housing affordability but these initiatives will not favourably affect our Australian businesses until well into 2009. We expect that building product profits for the full year will be significantly below the prior year.
"We expect continued growth and competitive market conditions in Asia for the remainder of FY2009. First quarter results were similar to last year and Asian earnings should be better than last year’s levels.
"Since year end, US housing permits and starts have continued to decline and earnings from our brick and roof tile businesses will be below last year despite the significant step change cost reductions which are being progressively implemented.
"Construction materials results have been adversely affected by the deterioration in US residential and commercial markets since year end and by adverse weather conditions. Full year US construction materials earnings are expected to be below the prior year."
So it’s no wonder Boral shares ended down 45c, or more than 8.8% at $4.63 on Friday and hit a new 52 week low of $4.61 in trading after the AGM.
Boom Logistics has had a tough year or so with management problems, weather problems hurting business in some states and a mixture of other factors that cut 2008 earnings.
On Friday the annual meeting of the Melbourne-based crane hire and mining services group heard that there’s confidence the company is well positioned to weather the economic downturn as it recovers from that challenging period.
Boom shareholders were told the company was not immune to the economic downturn, but the company’s diversification and limited exposure to the residential sector would bode well for future earnings.
It’s a message that obviously had some strength. Boral fell sharply on a tough day’s trading because of a gloomy outlook. Boom shares edged up 1.5c to 99c when the overall market was off 2.7%.
That was after the shares had slumped to a day’s low of 92c after the AGM, so there was a late rally of sorts.
Boom’s newis
