Adbri off to a strong start after a challenging year which scuttled the final dividend

Adbri shares have surged on a strong start to the year, as shareholders expressed their anger at the company’s weak recent performance.

Adbri says housing starts remain strong for now.

Adbri’s chairman Raymond Barro was talking up its strong start to the year at its annual meeting on Thursday, while copping criticism from retail shareholders about the building products firm scrapping its final dividend and returns more generally.

Adbri shares were trading strongly early on Thursday, up 12.5 per cent at $1.80, after the company said its underlying net profit underlying for the first quarter of the calendar year was “significantly above’’ the same period last year.

However with the share price sitting well below the 12 month high of $2.90, and the company failing to pay a final dividend for its financial year to the end of December, some retail shareholders asked Mr Barro for guidance as to when they should expect their investment to turn around.

Adbri, which makes products for the building and mining sectors, has delivered a total shareholder return of negative 41.7 per cent over the past year and negative 3.1 per cent over the past decade.

The company’s shares were trading at more than $7 each in mid-2018.

One retail shareholder, who said he owned shares through his self-managed super fund, told chairman Mr Barro he had made “substantial losses” on his Adbri shares in recent years and made it clear “we are not happy’’.

“The directors have to be held responsible for this,’’ the shareholder told the meeting.

“We are looking at substantial - many, many thousands of dollars lost in our superannuation fund, and particularly as no dividend was paid recently. It’s an appalling situation.’’

Adbri posted a net profit for 2022 of $102.6m, down 12.1 per cent, on revenues which were 8.4 per cent higher at $1.7bn. No final dividend was paid, compared with a 7c fully franked dividend the previous year.

Mr Barro had already, in his speech to the meeting, made it clear that the board was also unhappy with the financial performance of the company.

“Let me be clear - as your chairman of the board and a fellow shareholder - our returns have not been to the standard we would like at Adbri,’’ he said.

Mr Barro said they had taken action including “implementing changes at the senior leadership level’’, with former chief executive Nick Miller resigning in October last year, followed by former chief financial officer Theresa Mikota in November.

Current chief executive Mark Irwin initially took over the top job in an interim role and in February was made permanent, albeit on a fixed contract which currently runs to just October 2024.

The company is still in the process of recruiting a permanent CFO, Mr Barro said.

On the operational front, Mr Barro said in his 30 years in the industry he had never experienced the sort of cost headwinds which had been apparent in the past 12-18 months.

Mr Barro said he would not give specific guidance, but said the first four months of the year were “significantly better” than for the start of 2022, and the company had implemented a number of other plans to improve returns.

Mr Irwin told the meeting that Adbri was experiencing strong demand across its key segments.

“As a result of the combination of market forces and management initiatives, underlying net profit for the period ending April 2023 is significantly above January to April 2022,’’ Mr Irwin said.

“Demand from the mining sector for cement and lime continues to be strong and is anticipated to remain strong for the remainder of the year.

“The commercial and industrial, multi-residential and infrastructure sectors also continue to support strong demand for concrete and aggregates.’’

Mr Irwin said a backlog of residential works continued to underpin good order books for the future “However, the outlook for the residential sector remains somewhat patchy in the medium term’’.

“While cost headwinds are expected to persist in 2023, particularly in the areas of energy, pleasingly as mentioned, we are seeing the positive impact of last year’s price increases, as well as further pricing gains in 2023 across most product lines as we maintain strong pricing discipline.

“So while we are happy with our year to date performance and trading conditions, general economic conditions do remain somewhat uncertain and as a result, we will not be

providing forward guidance.’’

Mr Irwin said the upgrade of its Kwinana facility was still on track for commissioning in the second quarter of 2024.

That project is now expected to cost between $385m and $420m, up from a $200m initial estimate in December 2020, as disclosed to the market in April, but Mr Irwin said it still had a positive net present value “and we remain confident it will support solid earnings over the long term’’.

The company’s remuneration report was passed with a vote of almost 96 per cent in support.

The Barro family owns 43 per cent of Adbri.