'Moulting' Boral fights cheap imports
BORAL is several months away from completing the first stage of its restructuring as it battles severe headwinds from cheap imports and overcapacity in the building products market.
On Wednesday it disclosed a net loss of $25.3 million for the December half - a reversal from a profit of $152.7 million a year earlier - on revenue of $2.8 billion, up from $2.4 billion a year earlier. It posted a loss of 4.1¢ a share for the half, after earning 20.4¢ a share a year earlier.
Even so, directors have sought to retain investor confidence by paying a 5¢-a-share interim dividend, down from 7.5¢ a year earlier. This helped push the shares to $4.91, up 4¢.
Last month, Boral said it would axe 700 jobs - a quarter of its head office staff - as it attacks an "entrenched bureaucracy", chief executive Mike Kane said. A third of head office staff were likely to lose their jobs by the time the restructuring was completed, he said on Wednesday.
"Our internal focus was getting in the way" of focusing on customers, he said.
Boral refused to provide guidance for the year to June earnings, since several decisions about the future of key building products are yet to be made.
"Right now we're moulting, and its not pretty," Mr Kane said.
Analysts welcomed Mr Kane's directness. "It's a turnaround story, not a cyclical recovery story," one analyst, who did not wish to be named, said. He pointed out "it is a six to nine-month story".
"CEOs who tell it how it is are always welcomed by investors. He's put his reputation on the line in committing to getting costs out of the business."
Key problem areas are cement and building products - bricks, timber and windows - while the US is yet to turn around even with the improvement in housing starts there.
In the US, Boral anticipates housing starts this financial year will reach 860,000 units and rise to 1 million units next financial year.
It lost $38.7 million before interest and tax in the US, down from $51.5 million a year earlier, with the building products division losing $17.8 million, a reversal from the $6.3 million profit of a year earlier.
In the cement division, Boral is to halt the production of clinker at Waurn Ponds, with further changes planned.
"In cement . . . the dynamics are changing - and changing rapidly," Mr Kane said. "With import [price] parity the ceiling, a low import price out of Asia and no price leverage, the halcyon days of the past won't come back. We're taking costs out on a phased basis."