Boral slashes costs in tough climate
Boral has warned of continued sluggish demand and the drag of its local building materials and US arms on earnings, with the US not expected to move into the black until late in the financial year.
At the same time, its construction materials business is expected to put in a static performance, amid wariness over the impact of the slowdown in spending in the resource sector.
Boral refrained from giving firm guidance at Thursday's annual meeting. Rather, it highlighted the push to slash costs as it seeks to move earnings onto a sustainable basis. "It will take several years before we achieve the transformation we are planning," chief executive Mike Kane said.
In particular, the group is seeking to lift the return on funds employed to average 15 per cent "through the cycle". This is significantly higher than the present level of 4.7 per cent.
Since being appointed CEO a year ago, Mr Kane has moved to cut costs, lift cash generation, reduce borrowings and close or sell unwanted assets.
The second stage of the cost-cutting regime includes reducing the outlay on contractors, moving to cheaper office accommodation and changes to procurement programs, and is expected to reduce costs by $25 million this financial year, and a further $20 million next financial year. The recent closure of the Berrima colliery south of Sydney will save another $7 million, excluding transition costs.
It is also seeking to raise the prices of some products, although a recent rise in cement prices was unsuccessful, shareholders were told.
The largest asset deal so far was to forge a joint venture with US Gypsum across Asia and the Pacific, by pooling their interests. This will raise an initial $US500 million while also reducing earnings by an estimated $15 million.
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