Construction industry woes cast cloud over Barro Group’s AdBri talks

Barro buys products from AdBri and AdBri sells products to Independent Cement and Lime, a joint venture between Adelaide Brighton and Barro that supplies cement.

All eyes will be on AdBri when the building materials provider reports on Tuesday with a privatisation by major shareholder Barro Group still being discussed as a real possibility in the near term.

There is talk the family-owned Barro Group was in talks with private equity firm Brookfield late last year about a possible move, but sources close to AdBri say there is nothing on the agenda. The cement importer’s market value of $1.2bn is symptomatic of what has happened more broadly among industrial companies listed on the Australian Securities Exchange.

AdBri’s value was once $4.4bn.

Many of its rivals have shrunk considerably over the past decade, with the exception being the $3.7bn Brickworks, which has been offered support from its property portfolio and seen its market value double.

CSR in the 1960s was one of the largest companies on the Australian Securities but after it has sold off its Rinker building materials business, gas, sugar and glass operations, the market value of the plasterboard producer is now $2.39bn.

Privately held Western Australia building materials provider BGC is now worth less than $1bn after it was thought to be valued at about $2bn several years ago, while the $3.4bn Fletcher Building has seen its value almost halve in the past decade and $4bn Boral has been treading water as both Fletcher and Boral have retreated from the US market in recent years.

The Barro family purchased stock in AdBri when the share price was over $6 and on Friday shares closed at $1.84. The Barro Group owns 43 per cent of AdBri and managing director Raymond Barro is company chair while his sister, Rhonda, is also on the board and is executive director.

Barro buys products from AdBri and AdBri sells products to Independent Cement and Lime, a joint venture between Adelaide Brighton and Barro that supplies cement. The Barro holding is now worth about $400m, down from about $2bn in past years.

It was once a cash cow delivering the Barros about $60m in annual fully franked dividend payments, so it would make sense that a privatisation would be on the company’s agenda.

Among Barro’s assets are the Victoria-based premixed concrete provider Pronto Concrete and East Coast Cement.

A privatisation could mean the Barros could cut costs where there are areas of duplication.

When operations are consolidated, it could list further down the track as a bigger business.

The Australian Competition and Consumer Commission cleared the Barros from its ownership of AdBri, so it may also clear an acquisition of the company as a whole.

Like other building materials providers, AdBri is struggling with higher costs, which groups need to pass on to customers.

Conditions are also expected to be tougher for the construction industry, with rising interest rates expected to put a damper on new projects in both commercial and residential arenas. With the AdBri share price considerably low, another option is a buyout proposal from another suitor.

The most likely buyers of businesses in the building materials space are thought to be Japanese companies.