This article is from the Australian Property Journal archive
BUILDING products company Fletcher Building came up trumps yesterday posting a strong profit result, whilst Boral recorded a fall in its interim profits for the first half of the year ended December 31 2007.
Fletcher Building reported net earnings of $235 million, compared to $193 million in the previous corresponding period and as a result, earnings per share increased to 47 cents from 41 cents.
The group has declared an interim dividend of 24 cents per share, up 2 cents per share over the previous interim dividend.
However, Fletcher Building noted that total shareholder return was negative 4% for the half-year, influenced heavily by the uncertainty in equity markets internationally.
But chief executive Jonathan Ling said this is a pleasing performance whichreflects the group’s ability to deal with variable and sometimes difficult operating conditions.
“Across our businesses, commercial and infrastructure markets are still strong, which is best exemplified in New Zealand with a construction backlog of over $1 billion.
“While there is some weakness in residential markets and provided there is no significant change in economic conditions, we remain comfortable with our earnings prospects for this financial year.” he added.
Meanwhile, Boral Limited was dragged down by the United States housing market and booked a profit after tax of $132 million for the period – down 10% or $15 million compared to last year.
Boral saw a 5% increase in sales revenue to $2.6 billion, whichreflects a 12% lift in Australian revenues due to price improvement, volume gains and growth initiatives.
But the Australian gain was more than offset by a 19% fall in US revenue due to the significant decline in US housing activity.
The strong performance from Boral’s Australian operations was underpinned by strength in most markets outside of New South Wales. The 15% increase or $42 million lift in Australian EBITDA did not however, offset the predominantly US housing-related $A64 million decline in offshore EBITDA earnings.
Boral’s EBITDA was 6% down to $360 million.
Boral’s managing director Rod Pearse said the half year result reflects a notable geographical shift in Boral’s earnings due to the solid lift in results from our Australian operations and the deep contraction in the US housing market.
According to Pearse, Australian earnings accounted for around 90% of total earnings, up from 74% a year ago.
“In the USA, the severe downturn in single family home construction across all major markets continued to negatively impact our US brick and roof tile businesses. Capacity rationalisation and cost reduction initiatives continue to mitigate the adverse impacts of the downturn with brick and concrete roof tile volumes down a further 20% and 43% respectively during the half year. Earnings from our US construction materials business improved.
“In Asia, our 50%-owned plasterboard joint venture, LBGA, benefited from business improvement initiatives and improved conditions in key markets. Construction materials market conditions remained challenging,” he added.
“Whilst there is considerably uncertainty around US housing activity and subject to weather, we expect that Boral’s profit after tax in FY2008 will be approximately 15% lower than the $298 million reported in FY2007 which is in line with guidance given at the Annual General Meeting last October,” Pearse continued.
Meanwhile, to offset its current lower share price, Boral has launched a buy back tender for approximately $100 million of its ordinary shares.
“Following today’s half year profit announcement and considering the strength and quality of Boral’s asset base together with the current low share price, it is a good time to undertake an off-market share buy-back,” Pearse said “The Buy-Back will offset an increase in share issuance arising from Boral’s dividend reinvestment plan and executive option plan over the past few years.”
Pearse said following the off-market Buy-Back, Boral’s gearing will remain in the target range of 40%-70% debt to equity and the group will retain sufficient capacity to invest in capital projects and other growth initiatives.
Boral will pay a fully franked interim dividend of 17 cents per share.
Australian Property Journal
