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[October 2007]
Boral Full Year Figures
For the 2006/07 financial year, Boral’s sales revenue of A$4.9 billion was 3% higher due to price strength, stronger construction materials volumes and growth initiatives. However, earnings before interest, tax, depreciation and amortisation of A$762 million were down A$61 million. Overall, Boral’s reported net profit after tax of A$298 million was 18% below the previous year largely reflecting the impact of lower volumes in the USA and in Australian building products as well as higher funding costs associated with growth investments.
Importantly, growth projects that have been completed are delivering earnings benefits and are offsetting a further reduction in Boral’s EBITDA which would otherwise have resulted from the significant Australian and USA housing downturns.
A strong profit lift from construction materials in Australia was more than offset by a significant decline in US earnings, softer results from Asia and lower earnings from Building Products in Australia. Boral is now into the fourth year of a cyclical downturn in new dwelling construction on the east coast of Australia. This downturn is particularly pronounced in NSW, where the company derives around 40% of its Australian revenues. Housing approvals in NSW are currently 41% below the last peak in 2003 and are 40% below underlying demand. In the 12 months to June 2007 detached housing approvals were down 4% in NSW and multi-dwellings were down 9%.
In other Australian states, Western Australian housing activity has been strong and Victoria and Queensland have remained relatively robust. However, the current rate of construction in Victoria and Queensland is well below underlying demand levels. Victoria is building around 17% below underlying demand levels and Queensland is building at around 9% below underlying demand, according to BIS Shrapnel. During the year the value of work approved for Australian non-dwellings and major projects was 8% higher and the value of work done in road construction and infrastructure increased by around 4%. Non-dwelling and infrastructure activity has been particularly strong in Victoria, Queensland and Western Australia. This has benefited Boral’s construction materials operations.
In the USA, the housing downturn has been very fast and very significant, particularly impacting Boral’s operations in the second half of the year ended June 2007.
As in Australia, Boral’s US construction materials businesses performed better than the building products businesses during the period, supported by solid levels of infrastructure and non-dwelling work. In Asia, conditions improved in a number of key plasterboard markets, whilst construction materials markets remained challenging. Around 3% of Boral’s earnings were delivered from Asia during the year. Earnings per share for the year of 50.0 cents compare with 61.7 cents last year. Return on funds employed reduced to 11.9% from 14.2%. Return on equity reduced to 10.0% compared with 13.2% in the prior year.
At 30 June 2007, funds employed of A$4.5 billion were 3% higher than the prior year, primarily as a result of value-adding growth investments. Operating cash flows for the year to June 2007, of A$482 million were 7% above the prior year. Capital expenditure for the year of A$418 million was 19% lower than the prior year including a 7% lower expenditure on stay-in-business (SIB) capital, which was A$192 million for the year. Boral’s balance sheet remains strong. Net debt at 30 June 2007 was A$1.5 billion compared with A$1.6 billion at June 2006. Boral’s gearing level (debt/equity) of 50%, was down on last year’s 57% gearing level, and remains in its targeted gearing range of 40%-70%.
ENDS