Results: Boral Marking Time, Hardie Sees Some Upside. —
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Results: Boral Marking Time, Hardie Sees Some Upside.

February 29th 2012 - Australasian Investment Review – (AIR)

On the surface, building products maker Boral had a better December half year than it has in the last couple of years.Net profit rose 65% in the six month period to $153 million, from $92 million in the previous corresponding period.

But the latest result included an $86 million gain on the fair value of its acquisition of an Asian plasterboard business, announced last month ($US135 million gross value).

Excluding this and other significant items in the six months to December 31, net profit slumped 28% to $67 million, from $92 million in the previous corresponding period.

Sales rose 2% to $2.43 billion in the latest half year, from $2.39 billion a year earlier.

The underlying result reflected the extent of market declines in Boral’s traditional Australian activities and a continuation of the difficult market for residential housing in the US, chief executive Mark Selway said yesterday.

In January and February, the company’s performance was negatively impacted by weather in Queensland and NSW, which weakened demand and delayed the start of new building activity, Boral said.

Despite the weaker result, interim dividend was left steady at 7.5c a share, a sign of the company’s confidence about the outlook.

That was supported by directors saying they expected to deliver improved earnings in the six months to June.

But the company warned that the weak housing market will continue to affect its underlying performance.

“January and February 2012 results have been significantly influenced by weather-related issues in Queensland and New South Wales which have impacted demand and delayed the start of new project activity,” directors said.

“Positive signs of a United States housing recovery will need to translate into increased demand, particularly in the final quarter of this financial year.

“Assuming a return to normal shipping volumes, on balance we expect our full year net profit after tax before significant items to be between $150 million and $175 million and, given the on-going uncertainty, we will look to provide a further update ahead of our full year announcement,” directors said.

Seeing the company earned an underlying profit of $173 million in 2010-11, the company isn’t looking for much of a gain, if any this year. But if the full year forecast can be achieved, then the second half should see a sharp recovery in earnings.

Boral shares dipped 2% or 12c to $4.28.


And another building products group has expressed cautious optimism about its near term outlook.James Hardie Industries yesterday told the ASX that it had increased its underlying profit and maintained its target for full year profit despite continuing weak housing markets here and in the US.

The company said it had earned a net operating profit of $US27.7 million ($A25.97 million) for the three months to December 31, 2011, up 32% from $US21 million ($A19.69 million) in the previous corresponding period.That boosted earnings for the nine months of its fiscal year to $US108.3 million ($A101.52 million), also a rise of 31% in the $US82.2 million ($A77.05 million) earned in the first nine months of 2010-11.

(The net operating profit excludes James Hardie’s asbestos-related costs, plus regulatory costs and tax adjustments).

The company said demand for housing construction in the US, where it does the majority of its business, remained subdued.

There remained little evidence that a sustainable recovery in the US housing sector was underway, James Hardie said.

The Australian market was also weak, and an immediate pickup in housing construction was not anticipated, it said.

The company again delivered improved operating earnings.

“In the US, gains in category share and a more stable operating environment were a significant driver of the company’s stronger performance when compared to the prior corresponding periods,” said James Hardie’s CEO, Louis Gries.

“The Asia Pacific business again contributed strongly to the results. The Australian and New Zealand businesses, in particular, delivered solid results when set against the softening conditions in their market environments.

“Although some industry data is suggesting an incremental improvement in the US market environment, demand remains subdued and at near historically low levels across both the new construction and repair and remodel markets.

“Our current year results also reflect manufacturing efficiency gains and improvements in cost management.”

For the quarter, total net sales increased 4% to US$283.0 million, gross profit was up 7% to US$90.6 million and EBIT excluding asbestos and ASIC expenses increased 21% to US$36.5 million compared to the prior corresponding quarter.

EBIT including asbestos and ASIC expenses for the quarter moved from a loss of US$16.9 million in the third quarter of last year to a profit of US$1.8 million in the third quarter of the current year.

For the nine months, total net sales increased 6% to US$928.2 million, gross profit was up 6% to US$311.4 million and EBIT excluding asbestos and ASIC expenses increased 10% to US$151.0 million.

EBIT including asbestos and ASIC expenses increased from US$53.9 million to US$162.9 million.

But, the company said it still expects net operating profit for the year to March 31 to be in a range of $US130 million and $US140 million ($A121.86 million - $A131.23 million).

Hardie shares fell 32c or 4% to $7.23.

This Information is provided to you by the Australasian Investment Review (AIR). Subscriptions are free.AIR reports about financial markets and investment products in the widest sense possible. The AIR website and all its contents is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before making any investment decision.


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