Boral posts $441m profit result on US buy, earnings
Building materials company Boral's 50pc jump in full-year profit for fiscal 2018 has surpassed Morningstar's expectations, driven by an uptick in non-residential construction activity.
Building materials company Boral has lifted its full-year profit by nearly 50 per cent to $441 million, boosted by a strong construction market in Australia and its Headwaters acquisition in the US.
The company's revenue for the year to June 30 was up 33.7 per cent at $5.87 billion.
Management also announced a 14 cents a share full-year dividend, 50-per cent franked, up 2 cents from 2017.
"Australian earnings performed ahead of what we were looking for," says Morningstar equity analyst Grant Slade.
He cites the acquisition of Headwaters - a US-based building products manufacturer - and an uptick in local infrastructure and other non-residential construction activity as key improvements.
Growth in these construction segments underpin his improved outlook for Boral, "based on our near-term infrastructure and non-residential growth expectations," Slade says.
"Those will provide a nice offset to falling residential and additions and alterations markets, which we’re expecting to fall.
"We’re expecting total dwellings completions to fall by about 7 per cent in fiscal 2019. But the infrastructure and non-residential demand will more than offset that impact," he says
Earnings in the company's largest division, Boral Australia, rose 15 per cent to $634m
At 10.55 Sydney time, Boral shares were up 8.3 per cent to $6.95 in a firm Australian market - a 33 per cent premium to Morningstar’s fair value estimate of $5.20.
"While our business is not immune to unfavourable weather impacts and operational disruptions, the full year results confirm that our transformation strategy is progressing well, and that Boral can deliver significant earnings with highly attractive margins," chief executive Mike Kane said.
Earnings in the company's largest division, Boral Australia, rose 15 per cent to $634 million, but those from the USG Boral joint venture fell 6 per cent to $268 million as a result of higher costs and soft results in several overseas markets.
Boral's North America division delivered full-year earnings of $368 million, more than three times the $111 million recorded last year, mainly because of the Headwaters acquisition.
Mr Kane said the first year delivered synergies of $US39 million, exceeding the initial $US30-$US35 million target.
"We have increased our initial year-four synergy target by 15 per cent to $US115 million, as a result," he said in a statement on Wednesday.
Mr Kane said Boral's earnings growth is expected to continue in the coming years, predicting near-double digit growth without including gains from property.
"Volumes from commercial, infrastructure and major projects activity, and margin improvements are expected to more than offset the impacts of a moderating residential construction sector," he said.
Boral has forecast earnings from the Australian business to be at least in line with the previous year, while earnings from North America will rise by around 20 per cent.
The company's share price rose to $7.10 by 1pm Wednesday, versus Morningstar's most recent $5.20 fair value estimate as at 20 July.
Boral's bumper full-year result
- Net profit up 48.5pct to $441m
- Revenue up 33.7pct to $5.87m
- Final 50-per cent franked dividend 14 cents a share, up one cent
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