Adelaide Brighton posts a loss as times remain tough in the construction market
Adelaide Brighton is shoring up its business to cope with the cyclical low in the construction sector.
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Adelaide Brighton has swung to a net loss for the half year and doesn’t expect the residential construction sector to recover until 2021.
The construction materials company booked an underlying profit of $55.3 million, however this swung to a net loss of $17.9 million once impairments were factored in.
Revenue of $755.7 million was 6.3 per cent lower with cement and concrete sales lower, while lime was stable.
AdBri previously flagged it would not pay a dividend for the first half to preserve cash.
Chief executive Nick Miller said the company was responding to the challenging business environment on a number of fronts.
“In the context of prevailing market conditions, we have taken decisive steps in order to maintain flexibility to pursue reinvestment and growth opportunities while actively implementing cost reduction and operational improvement initiatives,’’ he said.
“Adelaide Brighton is a durable business with strong share in its key markets. While we expect demand conditions to remain soft in the near term, the company is well placed to weather the cycle and maintain and grow our strong market position.
“We see significant opportunities to create long term shareholder value including the growth of our lime business, expansion of our concrete and aggregates footprint, increased exposure to large scale projects in the infrastructure sector and maximising value from our extensive land holdings.”
The company told the ASX that residential construction approvals had declined more than 25 per cent for the six months to the end of June, and “residential construction is forecast to continue to decline until 2021, until it returns to growth.
“However, the Company expects both mining and infrastructure to increase demand for construction materials in the near term.
“Capacity expansion in iron ore and gold production, along with the reopening of nickel capacity, will increase the demand for both cement and lime in Western Australia and the Northern Territory.’’
AdBri is forecasting a full year underlying profit of $120-$130 million, down from $191 million in the previous corresponding period.
The net debt ratio at the half year was 45.9 per cents, above the target range of 25-45 per cent, with the company holding $519.2 million in debt.
The company’s shares were trading 1c higher at $3.14. The shares hit a 12-month high of $6.43 on September 3 last year.