Boral
Recommendation
It’s hard to judge Mark Selway’s two-year stint as chief executive of Boral a success. He left the company in May 2012 with net debt of $1.5bn, the same as when he arrived, despite a $490m capital raising early in his tenure.
Selway did little to improve Boral’s reputation as a money pit. The company spent $514m of shareholders’ funds on acquisitions in 2012, and another $409m on capital expenditure. No wonder dividends have been cut from 34 cents a share in 2007 to just 11 cents last year.
To avoid another capital raising, new chief executive Mike Kane has promised to tame Boral’s voracious appetite for capital. He’s squeezing working capital to generate cash and plans to sell $200m-$300m of assets.
With a new chief executive has come the obligatory restructuring. Kane sacked 1,000 staff and made writedowns of $109m in its 2013 interim results. On sales of $2.8bn, the company reported a net loss of $25m.
With housing starts picking up in the US, and evidence they’re recovering in Australia too, Boral’s share price has jumped from lows around $3.00 last year. It’s also up 10% since 18 Aug 10 (Better Value Elsewhere – $4.44).
The last words we’ll leave to Kane himself. On his commencement, he said: ‘Boral is very well positioned for the next upswing in activity’. It’s all the evidence you need that the company remains hostage to the building cycle. AVOID.
James Greenhalgh has recently rejoined Intelligent Investor Share Advisor as an occasional freelancer.