Boral, which is controlled by Kerry Stokes, will hike prices as interim earnings slide 23pc

The building materials major, which is controlled by billionaire Kerry Stokes, will raise prices as it battles higher energy costs and other issues.

Boral, which is controlled by billionaire Kerry Stokes, will lift prices on its building materials products amid higher energy costs and other issues. Picture: Aaron Citti

The Kerry Stokes-controlled Boral will slug customers with national price increases for its building materials as it battles hikes in energy costs, supply chain constraints and labour shortages for its Australian business.

The Sydney-based company has introduced “out of cycle” national price increases effective January and February, offsetting the impact of more expensive energy bills which it expects to remain high through the second half trading period.

Chief executive Zlatko Todorcevski said it was difficult forcing higher costs on its customers, but the move reflected a broader inflationary environment and supply chain constraints.

“The feedback is it’s never easy to have a price increase conversation with customers but they’re noticing it quite strongly in a lot of other building materials,” he told The Australian.

“Frankly, the increases we’re putting through are not as large as what we’ve seen in timber or what we understand is happening with steel. They’re more moderate and focus on offsetting what we’re seeing in energy.

“I feel good about our ability to get traction, because those increases are more moderate, and fixate on those supply chain disruptions and energy impacts that we’re wearing.”

Boral’s first half earnings before interest and tax slid by 23 per cent to $78m, as construction shutdowns hit for the six month period to the end of 2021 amid a broader inflationary environment.

Mr Todorcevski named hikes in coal, diesel and gas during the half as oil prices continued to climb, with costs likely to remain higher in the second half.

One of its contracts for coal expired in the first half which had led to a spike in costs as benchmark pricing increased, Mr Todorcevski said.

Boral is also targeting annual transformation benefits of $60 –$75m net of inflation to boost its bottom line and expects revenue in the second half to be higher than the prior six months.

It noted supply chain constraints after Covid-19 lockdowns for items like heavy vehicles, along with labour shortages which impacted the first half, are expected to continue through to June 30.

“The supply chain has extended so it’s taking a lot longer to get the vehicles in the country, which means we’ve got to pre-order to a large degree. The other one is just availability of labour. We have particularly noticed that in drivers and quarry managers. So we’re not only looking at accelerating some of our recruitment and retention progress, but how we reduce the impact on our fleet.”

Boral recorded a 3 per cent lift in sales on a comparable basis to $1.5bn and said a previously announced capital return of $3bn would be completed on Monday.

Shareholders will receive a cash distribution of $2.72 a share in the form of a $2.65 a share capital reduction worth $2.923bn and an unfranked dividend of 7c a share worth $77m, in keeping with its AGM vote.

Boral pointed to a rebound in multi residential construction although a much hyped pipeline of big infrastructure projects continues to only simmer away.

“New major projects remain slow to move into execution, despite the sizeable infrastructure pipeline. We have successfully secured a number of major projects opportunities in the half, which will predominantly benefit from 2023, and are tendering on numerous other opportunities,” Boral said in a statement.

Macquarie described it as a solid result.

“The core of the result appears better than we expected and the commentary on the market environment in keeping with our positive thesis,” Macquarie analysts said.

Kerry Stokes’ Seven Group is in line for a $2.1bn windfall as cash flows back to shareholders following a sale of Boral’s international operations.

The billionaire took control of the construction materials giant in 2021 after his conglomerate Seven Group amassed a 70 per cent stake, with his son Ryan Stokes installed as Boral chairman.

Seven Group aggressively pushed for Boral to unwind its international expansion due to a substandard performance, opting instead to boost its fortunes from focusing on Australian construction and landing contracts from a big infrastructure pipeline.

Boral sold its US building products unit to Houston-based manufacturer Westlake Chemical for $US2.15bn ($3bn) last June and called time on the US in December after more than 40 years with the sale of its fly ash business to Eco Material Technologies for $US755m.

It had previously offloaded its half share of the USG Boral plasterboard venture for $1.43bn in October 2020.

Boral shares closed down 1.85 per cent to $3.72, giving it a market capitalisation of $4.1bn.