While James Hardie continues to make hay (and a lot of money for its shareholders) from its obvious success in building products in Australia and in the US (in particular), sector rival Boral is still struggling to regain the wallets of investors as it looks to get rid of dud assets bought by the previous CEO, Mike Kane.
James Hardie has rewarded shareholders with a reinstated dividend and a one off payment (see accompanying story) while shareholders in Boral will have to wait till mid year for a payout.
Boral’s delay was revealed in its December half year results yesterday in which management said the company will delay paying a dividend until net debt drops below its $1.5 billion target.
But in doing so Boral did drop a small hint that something more than a dividend could be paid when it said “surplus capital” would be there for shareholders once the asset sales settled.
Perhaps that’s why the company’s shares edged up 0.2% to $5.42 at first before investors took another look, listened the analysts call and sold them off, driving them down more than 7% in afternoon trading where they closed at $5.01 and looking weak.
Investors will now have to wait until August for a sign of just what they will get. Boral expects to know in June when the sale of its interests in USG Boral and Meridian Brick (in the US) are due to be completed.
With net debt still at $1.9 billion Boral told the ASX on Tuesday that it would not be paying an interim dividend to follow last year’s partially-franked 9.5 cent payment, even though net debt fell $600 million in the half.
“Following receipt of proceeds from the sale of USG Boral and Meridian Brick, net debt will fall below $1.5 billion, creating a surplus,” Boral told investors.
“Subject to prevailing conditions and other reinvestment opportunities, surplus capital will be available for distribution to shareholders.”
Boral said statutory profit for the first half rose 18.2% to $161.4 million, though was flat at $156 million before significant items were factored in.
Total revenue for the half fell 9% to $2.72 billion.
The company said market demand in Australia remains uncertain, especially in multi-residential and non-residential construction and in the timing of major projects entering execution.
Building approvals and housing finance data both show that while the non owner occupied dwelling market is weak (because of the downturn in migration and weak demand overall from investors especially), the private home building market is soaring – finance for owner occupied dwellings jumped 31% in 2020 and approvals for owner occupied housing surged more than 55%. The value of home renovations in December was 44% higher than December 2019.
That is more than offsetting the weakness in approvals and finance for home units and the like where Boral has been getting less business because of the slump.
In contrast the company saw strong housing demand in North America which Boral thinks will continue (as does James Hardie).
“While market conditions across the sector remain uncertain, we have made strong early progress to reset our portfolio of businesses, in line with our commitment to shareholders to transform Boral into a more agile, resilient and profitable company,” chief executive Zlatko Todorcevski said.
“Much work remains to be done but we are well on our way,” he said.
But so far as investors are concerned, Boral is very much a work in progress.
Boral’s revenue from Australian operations fell 8% in the half, which it said reflected lower volumes and pricing, particularly in NSW and Queensland where major project work and multi-residential activity declined.
Australian EBIT dropped 20% to $128 million due to lower revenue and reduced property earnings – that’s despite a boom in owner occupied home building, a market Boral has either ignored, or being locked out of smarter, nimbler operators.
US revenue fell 3% to $US801 million, while US earnings jumped 22% to $US73 million.
Excluding a profit on sale of assets of about $US5 million, and prior year $US10 million one-off costs, underlying US earnings were broadly steady on lower revenue.
