Boral in new US joint venture, as it posts flat net profit

Boral will fold its US bricks business in with an affiliate of Forterra, as it posted flat net profit of $256m.

Boral’s Mike Kane.

Boral has announced plans to fold its US bricks business into a new joint venture with an affiliate of Forterra, as it reported flat net profit of $256 million.

Extending a formula applied to its US gypsum business and the Australian brick venture formed with CSR in May 2015, chief executive Mike Kane said he expected to pull up to $US25 million of synergies out of a business with the capacity to produce 2.6 billion bricks a year.

Mr Kane said the US housing market was four years into a cyclical upswing, but that the high fixed costs and energy intensive nature of brick making meant it was difficult to create a profitable business.

“The North American bricks joint venture provides the opportunity to create a more efficient and better positioned business to compete long term,’’ Mr Kane said.

Boral’s (BLD) result was hit by significant items of $12 million that reduced what would have been a 9 per cent increase in after-tax profit to $268 million.

For the year to June 30, Boral logged a broadly flat profit of $256 million, although underlying earnings — which stripped out $12m in one-off items — rose 8 per cent to $268m.

The results outshone analyst projections for net profit of $253.4m and underlying earnings of $254.5m.

Boral also reported pre-tax earnings before depreciation and amortisation (EBITDA) rose 6 per cent to $645m, a number that also outstripped market projections.

Despite the steady earnings the group reported a modest 2 per cent dip in sales to $4.3 billion as strength in the US and Australian housing markets was offset by revenue declines from LNG projects in Queensland, Western Australia and the Northern Territory as key projects came into production.

“We have continued to improve our performance across our businesses in line with our strategy, managing our portfolio more efficiently and maintaining a strong balance sheet,” Mr Kane said.

“The continued growth in Boral’s earnings demonstrates the great work that has been done to improve our cost base, grow margins and efficiently supply market demand, which continues to be strong in Australia and Asia, and is growing in the US.”

The company was cautious on the outlook, tipping modest improvements across its core businesses.

“In FY2017 we expect slightly improved earnings from Boral Australia, underpinned by infrastructure activity and a thriving NSW market, lower property earnings and softer results from building products businesses,” the group said.

“We expect continued underlying growth from USG Boral, and earnings from Boral USA to continue to strengthen in line with the housing market recovery. “

Boral declared a final dividend of 11.5c, in line with expectations. Its full year payout rose 25 per cent to 22.5c a share.