Boral sells US fly ash business to Eco Material Technologies for $1bn

Australia’s biggest construction materials company has exited the US following the sale of its ash business for $1bn as boss Zlatko Todorcevski focuses on its vast local operations.

Boral has sold its US-based fly ash business to Eco Material Technologies for $1bn as the building materials group focuses on its local operations.

Boral has called time in the US after more than 40 years with the sale of its fly ash business to Eco Material Technologies for $US755m ($1bn), as it focuses on its construction materials business back in Australia.

Chief executive Zlatko Todorcevski says the group’s ongoing divestment program has now “unlocked substantial value”.

“Together with the sale of the North American Building Products business and our stake in Meridian Brick … we will have divested the North American businesses for more than $4bn.”

“This is a significant milestone that supports our strategy to refocus on our construction materials business in Australia.”

Boral has owned and operated fly ash businesses in the US for some 40 years.

But it the strategic decision to focus on the Australian market under Mr Todorevski following its chequered performance in the US in the past.

The company has also faced pressure to sell its assets in the US after Seven Group amassed a stake more than 69 per cent stake in the company.

Fly ash also relies on coal-fired power station for production, a factor that makes it unappealing for environmentally friendly equity investors, and Boral has considered sourcing other greener alternative products that make cement.

The net proceeds from the sale will add to surplus capital, with the board to determine the most appropriate way to return surplus capital to shareholders at the relevant time, the company said.

The deal is expected to complete in the 2022 financial year, allowing for the regulatory approval process. It’s also subject to customary conditions precedent and completion adjustments.

Morgan Stanley has suggested a sale of the US-based fly ash business could provide more positive momentum if it achieved more than five times its earnings before interest, tax, depreciation and amortisation.

The latest divestment follows the sale of Boral’s US building products division for $US2.15bn earlier this year and the divestment of US-based Meridian brick operation for $US250m last year.

At September’s annual shareholder meeting, investors backed chairman Ryan Stokes’ plans to return $3bn in capital to investors, ahead of the sale.

Mr Stokes also told shareholders at the meeting that Boral’s Australian business had not performed to its potential in the past, but he said that the company was now “committed” to do make it do so.

He said that over the past 12 months, Boral had started a “significant” transformation program with the long-term objective of improving return on capital employed.

“With a disciplined approach to operational performance and capital, I am confident that Boral can deliver improved returns on funds employed exceeding its cost of capital throughout the cycle, as well as industry competitive … earnings before interest, taxes, depreciation, and amortisation margins,” Mr Stokes said.

Boral shares closed up 1.6 per cent on Monday, at $6.27.