Shares in Australia’s biggest building materials provider Boral closed more than 3% lower after it issued a profit warning and said it was unable to predict when the soft conditions in the nation’s home building market would improve. Source: The Australian
A lower-than-expected third-quarter result for the 2013 financial year was blamed on weakness in the housing sector and a worse-than-anticipated performance in its
construction materials and cement division and its Australian building products operations.
Chief executive Mike Kane said it was hard to estimate when its Australian Building Products division would break even.
“It is largely dependent on what happens in the housing market . . . At this point, directionally, I’m not seeing any improvement,” he said. “I believe through our
cost-cutting efforts we will be able to reduce our losses, but perhaps not eliminate them unless housing improves in Australia next year.”
Soft home building conditions in Victoria, project delays in South Australia and Victoria, and poor weather in southeast Queensland were weighing on construction materials and cement, he said.
As a result, divisional third-quarter earnings were $19m below forecast.
Within the building products division, the group’s timber operations had been hurt as a result of the high Australian dollar and import competition.
Boral said it was continuing to focus on its “fix, execute and transform” strategy to improve performance by restructuring operations, selling assets and realigning its production capacities to mid-cycle levels.
The group cut 1100 jobs in the past six months, delivering $37m in cost savings this financial year and $90m on an annual basis.
Kane said the cuts were not enough to offset the headwinds the group was also facing, such as higher taxes and debt costs.
“It’s not enough to offset the three things that I’ve mentioned, and couple that with the third-quarter disappointment in both construction materials and building products,” he said.
Asked whether a cut in interest rates by the Reserve Bank would boost earnings, he said anything that stimulated the industry would help.
