NSW, QLD rain hits Boral earnings

The Kerry Stokes-backed company has taken a $23m hit to earnings after the extreme wet weather in NSW and Queensland disrupted operations.

Boral expects earnings to take a $23m hit from the extreme weather that lashed QLD and NSW at the start of the year. Picture: Glenn Hampson

Extreme wet weather and surging energy prices have hit Boral’s bottom line, prompting the building materials supplier to water down its expected earnings.

In a market update on Tuesday, Boral said the “exceptional weather” that lashed NSW and parts of South East Queensland had significantly disrupted its ­operations.

It also flagged sharp increases in fuel and coal prices as weighing on earnings despite recent moves to lift prices to offset rising costs.

“The impact on sales volumes of the extreme rainfall across NSW and Queensland in late February and early March have adversely impacted Boral’s earnings by (about) $23m,” Boral CEO Zlatko Todorcevski said.

The company now expects underlying earnings from continuing operations, excluding property, in the financial year to be between $145m and $155m, assuming no further weather event.

This comes as the weather bureau urged residents in Sydney’s flood-prone areas to be vigilant as 100m of rain is forecast to lash the city over the next four days.

Parts of the NSW coast are expecting 150mm of rain over the next seven days that may lead to flash flooding.

Mr Todorcevski said the rains had prevented the company from delivering products to customers and caused significant production disruptions to operations.

The company did not note which of its sites had been most affected. However, map data shows several sites adjacent to flood-hit areas in NSW and Queensland.

Mr Todorcevski said Boral was also facing higher fuel prices.

“Unusually extreme and rapid increases in the price of coal and diesel have recently occurred,” he said.

He said those energy costs would not be offset in January and February by price increases in Boral’s products.

Boral also noted that the company’s exposure to big swings in coal prices was unhedged for the second half, while hedging was in place for most of its expected ­diesel usage to April, with no hedging thereafter.

One of Boral’s coal contracts expired in the first half, which led to a spike in costs as the benchmark price increased.

The company said the “elevated fuel prices (were) also exacerbating supply chain con­straints” as previously flagged and were likely to flow into the second half.

Boral reported a 23 per cent slide in earnings at its first-half ­result, with the company moving to lift prices in an “out of cycle” ­increase.

Ord Minnett analysts said the downgrade represented a 26.4 per cent miss on expectations, with the floods likely to weigh on the business as NSW was its highest-margin region.

However, they said that, ­ despite the lockdowns weighing on results in the first quarter of the financial year, Boral had broadly seen stable volume trends for concrete, quarries and cement.

Ord Minnett said Boral’s out-of-cycle price rise and no construction lockdowns in the second half would help support performance for the full financial year. However, analysts noted earnings improvements depended on Boral’s flagged “transformation benefits” of $60m-$75m.

Boral shares fell as much as 5 per cent on the warning, and closed down 3.5 per cent at $3.33.