Adbri boss Mark Irwin upbeat on construction as Irish firm looks to finalise takeover

Adbri boss Mark Irwin has shrugged off worries about a construction slowdown as the company looks to tie up a $2.1bn buyout from Irish giant CRH.

Adbri cement at Birkenhead in Adelaide’s north. Picture: Matt Way

Adbri boss Mark Irwin has shrugged off concerns that the residential construction boom is quickly running out of steam, reporting strong demand for the company’s building materials as it looks to tie up a $2.1bn buyout from Irish giant CRH.

Rising interest rates and higher building costs have put a handbrake on buyer appetite, according to the latest ABS figures, with housing approvals falling 9.5 per cent in December.

However Mr Irwin said that trend wasn’t playing out across the Adbri business - which supplies a range of building products such as cement, concrete, lime and industrial minerals.

“We’re not seeing any drop off in demand for our product - we’re confident about that,” he told The Australian after handing down the company’s full-year results on Tuesday.

“If you read the official stats, building approval requests, statistically, have come off. But we’re not seeing it as it relates to demand for concrete.

“So as a company, we think the market fundamentals are good, and to the extent that there is a temporary drop off in approval requests, we think it’s going to come back.

“That’s why we’re confident that this year, in terms of volumes, will be the same as last year, with the exception of lime - we’re pleased with the outlook without getting overly confident.”

Price increases and strong demand delivered a strong underlying result for Adbri in the 12 months to December, with underlying EBITDA up 31 per cent to $311m, on a 13.1 per cent increase in revenue to $1.92bn.

Statutory net profit after tax fell 9.5 per cent to $92.9m, with the previous year’s result benefiting from property profits from the sale of land at Moorebank and Rosehill.

The company has kept dividend payments on hold to reduce debt and to pay for upgrades to its Western Australian cement facility at Kwinana.

Adbri confirmed on Tuesday that it had agreed to a $2.1bn takeover by Ireland-based building materials company CRH, entering a scheme implementation deed, under which CRH would acquire all of the shares that major shareholder the Barro Group doesn’t currently own.

CRH launched the $3.20 per share offer in December, with backing from Barro Group, which controls a 42.7 per cent stake in the company.

The deal remains subject to Foreign Investment Review Board approval and an independent expert concluding that the scheme is in the best interests of shareholders.

Adbri’s independent directors are unanimously recommending that shareholders back the deal when they vote in May or June.

Mr Irwin said the offer presented a “compelling” opportunity for shareholders.

“They’ve been looking to invest in Australia, to take a beachhead position, for a number of years,” he said.

“I don’t sense there’s going to be a change in strategy. I like the engagement we’ve had with them, my team has liked the engagement we’ve had with them.

“We know they’re really pleased with the quality of our team, the quality and positioning of our assets. We think, with their expertise, and their balance sheet, we think this is a really symbiotic transaction.”

Adbri’s backing of the deal follows a flurry of takeover action in the Australian building materials sector.

CSR confirmed on Monday that it was endorsing a $4.3bn takeover bid from French conglomerate Saint-Gobain. Meanwhile, Seven Group’s $2bn proportional takeover for Boral Group to mop up the shares it does not already own in the company launched last week.

In its outlook, Adbri said it expected demand for its products, with the exception of lime, to remain strong in 2024, and broadly in line with the previous year.

And while higher prices and a levelling-off of labour and other costs is expected to improve margins this year, Mr Irwin said energy costs remained a cause for concern.

“If you ask most manufacturing CEOs, or those that are in heavy industry, the one area that they’d have a collective gripe would be energy costs,” he said.

“I do think that’s an issue that’s still to play out. It’s an area that does worry us and our choice is looking to substitute as much energy as we can through alternative fuels, conversion opportunities, etc.”

Adbri expects its capital expenditure investment to reach between $270m and $290m in 2024, inclusive of the Kwinana upgrade, which is due to be operational by the end of the year.

The company’s shares were trading 1.8 per cent higher on Tuesday at $3.14.

Originally published as Adbri boss Mark Irwin upbeat on construction as Irish firm looks to finalise takeover