Boral investors put heat on CEO

Boral boss Mike Kane is facing pressure to consider stepping down earlier than expected amid investor impatience.

Boral boss Mike Kane is facing pressure to consider stepping down earlier than expected as investors grow impatient at the company’s mixed performance and the revelation of financial ­irregularities in its US business.

The board of the construction materials supplier led by Kathryn Fagg will hold meetings with its top shareholders in the next week to discuss a series of concerns.

Meetings are expected to focus on issues ranging from Mr Kane’s tenure at the company to the unfolding financial scandal along with remuneration and the company’s broader strategy.

Boral’s management team has also been shaken after its operations head, Ross Harper, suffered a serious health issue in late Nov­ember that has forced him out of work for several months.

Mr Harper had been considered one of the top internal contenders to replace Mr Kane along with chief financial officer Ros Ng, also under a cloud given questions over lapses in an internal audit connected with the US financial probe under way.

Boral’s sixth largest shareholder, Argo Investments, told The Australian pressure had mounted on Mr Kane following financial problems at its US windows business, although the investor still remained confident in the company’s long-term vision.

“It’s clearly disappointing whenever any of these things happen,” Argo managing director Jason Beddow said. “When things are going against you and then you have an internal stuff up, it adds fuel to the fire.”

Mr Kane on Friday said he had no intention of stepping down early from the company after significant financial irregularities were uncovered at its US windows business, with a series of internal audits failing to uncover the scandal. The construction materials supplier revealed late on Thursday it would take an earnings hit of up to $US30m ($44m) which involved misreporting of inventory levels, raw materials and labour costs at its windows plants between September 2018 and Oct­ober 2019.

The Boral boss is scheduled to step down in the next two years but questions are being asked over whether the succession process should be accelerated given investor unease.

Argo boosted its stake in Boral earlier this year and said the company was being knocked about by delays tapping into Australia’s $300bn infrastructure boom and outstanding questions over its 2017 Headwaters deal, which included the windows business.

“The bigger issue for Boral is it looks like a tough cycle in Australia on the infrastructure side and there are still questions over whether the big Headwaters spend is going to pay off for the company in the medium term,” Mr Beddow said. “Headwaters has been a roll-up story that probably hadn’t been fully integrated. So you’re dealing not only with bringing a new business into Boral but also one that might not have had its house in order.”

Still, Argo said it would retain its stake in the company for now.

“We won’t bail out at this point in time but clearly the company is taking longer than expected to ­execute some of their plans.”

Mr Harper had a medical procedure last month and noted he was recovering well.

The financial irregularities were reported to Boral management by a number of new hires working in the finance side of the windows business concerned by an upcoming internal audit. The windows division, which includes brands Krestmark, Legacy and Magnolia, achieved revenues of $US158m in 2018-19 or 10 per cent of Boral’s US operations.