'Moulting' Boral fights cheap imports
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."
Frequently Asked Questions about this Article…
Boral reported a net loss of $25.3 million for the December half, a reversal from a $152.7 million profit a year earlier. The company cited severe headwinds from cheap imports and overcapacity in the building products market as key reasons for the weaker result, despite revenue rising to $2.8 billion from $2.4 billion.
Boral is in the first stage of a restructuring aimed at cutting costs and simplifying the business. Management says it is several months from completing this stage and analysts described the turnaround as roughly a six- to nine‑month story. The CEO has used the analogy 'we're moulting' to describe the painful but necessary changes.
Yes. Boral announced it would axe about 700 jobs — roughly a quarter of its head office staff — and the CEO indicated that around a third of head office roles could be lost by the time the restructuring is finished.
Yes. Directors decided to pay a 5¢-a-share interim dividend, down from 7.5¢ a year earlier. The dividend decision was intended to help retain investor confidence and helped push the share price to $4.91, up 4¢ on the announcement.
No. Boral refused to provide guidance for the year to June because several decisions about the future of key building products are yet to be made, making near-term forecasting uncertain.
Boral’s US operations remain under pressure: the company lost $38.7 million before interest and tax in the US, an improvement from a $51.5 million loss a year earlier. The building products division in the US swung to a $17.8 million loss from a $6.3 million profit the prior year. Boral expects US housing starts to reach about 860,000 units this financial year and to rise to roughly 1 million units next financial year.
Key problems are overcapacity and cheap import competition in cement and building products like bricks, timber and windows. In cement specifically, Boral plans to halt clinker production at Waurn Ponds and is implementing further changes. Management noted that import‑price parity acts as a ceiling and low import prices from Asia limit price leverage, meaning past profit levels are unlikely to return.
Some analysts welcomed the CEO’s direct approach and framed Boral’s situation as a turnaround story rather than a cyclical recovery. They suggested the restructuring could play out over six to nine months. That said, the company has refused to give formal earnings guidance while it finalises decisions on key businesses, so investors should watch execution and updates closely.
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