Boral sounds alarm on gas prices

Building materials company says Australian plants could close if price hikes persist.

The boss of the nation’s largest building materials company has sounded alarm bells for the country’s manufacturing industry and signalled a strong likelihood his company’s Australian plants will close within the next decade due to annual energy price increases of 20 per cent.

Boral chief executive Mike Kane said natural gas prices increased 20 per cent in NSW last year and that was unsustainable.

“Unless the natural gas issue is solved for the eastern states of Australia, I think manufacturing has got a used-by date on it,” he said. “I just don’t expect it to get better soon. I think all fixed-plant manufacturers in Australia are challenged, challenged by the same things.”

At the Macquarie Conference in Sydney yesterday, Mr Kane said the recent decision by car manufacturers Holden, Ford and Toyota to withdraw from the local market reflected the bleak future for the Australian manufacturing industry.

“You have natural gas costs rising at 20 per cent. How long can you keep on doing that before you end up shutting the doors? I’m not saying anything different to most manufacturers in Australia.”

South Australia and Victoria would be severely affected over the long term because they were the most exposed to the sector, he said. Their housing markets were lagging, in contrast to NSW and Western Australia, and were unlikely to improve long-term, he said.

Mr Kane, an American, was promoted to chief executive of Boral in 2012 and moved swiftly to launch a turnaround strategy for the challenged company that has involved, slashing more than 1000 jobs, selling off non-profitable divisions, wading deeper in the lucrative Asian plasterboard market and attempting to merge its local brick operations with competitors such as CSR.

The company employed 12,500 people globally, 8000 of whom were based in Australia, and Mr Kane said manufacturing was a small part of the business, which had a $5.2 billion annual turnover.

But the potential shutdown of eight or so domestic plants in future years as part of the country’s overall manufacturing decline could be on the cards and would likely affect at least 1000 Boral employees.

Mr Kane has previously signalled the company’s intent to reduce its exposure to bricks, an oversupplied market partly driven by a greater shift towards apartment living.

However, while the company’s cement manufacturing was challenged by higher energy costs and the Asian market, where the product could be produced more efficiently, Mr Kane said it had higher margins.

Boral shares closed yesterday down 12c to $5.40.

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