Cement maker Adelaide Brighton looks for assets to buy

The cement maker is upbeat about the property and infrastructure markets despite a 10.9pc drop in net profit.

Adelaide Brighton CEO Martin Brydon says the demand ‘is very strong’. Picture: Heidi Linehan.

A surging property market and a healthy pipeline of infrastructure projects has Adelaide Brighton on the lookout for further acquisitions, in a bid to keep pace with demand and grow its market share.

“From a demand point of view on the east coast, it’s hard to be pessimistic. The only way to put it is it’s very strong,” chief executive Martin Brydon told The Australian.

The country’s second-largest cement supplier also said it was likely to raise cement prices for a second time later this year amid the robust conditions on the east coast, but declined to confirm the likely amount of the price rise.

Mr Brydon said the company was pragmatic about the residential property market eventually cooling off, but any slowdown would not immediately affect the business.

“Even if there was a significant drop in approvals or applications for housing, the pipeline is still there for the next 18 months,” he said.

In fact, recent strength in Melbourne’s residential market caught the concrete maker by surprise. “It’s actually stronger than what we thought it would be even six months ago,” he said.

While Melbourne is still heavily skewed towards residential in terms of concrete demand, Mr Brydon said upcoming infrastructure projects would more than pick up any slack from a fall in building approvals.

“NSW is more balanced,” he said. “There’s strong demand from residential but there’s also a lot of infrastructure work that’s been under way now for the past couple of years, and that’s just cranking up.”

But energy costs remain a sore point for the company, with an $8 million hit projected for the full year if electricity prices remain at current levels.

“We’ve been lobbying everyone,” Mr Brydon said. “It’s very unusual for business to be encouraging government intervention. It’s not normal and we don’t like doing it but I make no apology for it. In this instance there was no option.”

The company has spent $85.5m on bolt-on acquisitions in the year to date, and is “on the lookout” for more businesses that complement its existing network.

“They’re acquiring downstream concrete businesses to protect the upstream profitability and grow some of their market positions in places like Victoria,” UBS analyst Ramoun Lazar said. “They’re getting more exposure to concrete and aggregates and obviously on the east coast the conditions for those industries looks robust for the time being.”

Adelaide Brighton yesterday announced a 10.9 per cent drop in net profit for the six months to June to $68.7m, while revenue rose 4.7 per cent to $718.4m. For the full year it expects underlying net profit to be in the range of $188m-$198m.

The company announced an interim dividend of 8.5c per share, fully franked.

The result was affected by a number of one-off items. Weaker demand in WA and Northern Territory also weighed on the result, though WA was stabilising, Mr Brydon said. Adelaide Brighton shares closed 3.18 per cent higher at $5.84.