Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


Boral pins hopes on infrastructure pipeline

Glenn Freeman with AAP  |  25 Feb 2019Text size  Decrease  Increase  |  
Email to Friend

Weakening residential construction activity dampened Boral's (ASX: BLD) profits for the half-year ending 31 December 2018, but infrastructure projects will provide some relief, says Morningstar.

First-half profit fell 6.4 per cent to $200.2 million after the building materials supplier was hit by heavy rain in both the US and Australia.

Earnings before interest, tax, depreciation and amortisation declined by 8 per cent to $271 million in the Boral Australia division, the largest revenue contributor to the group.

While the overall result was in-line with the expectations of Morningstar equity analyst Grant Slade, he says declining margins in residential construction were slightly lower than expected.

"The price increases they were able to put through in the half were quite soft, relative to what we expected," he says.

"We were expecting around 3.5 per cent, but they came in between 1 and 3 per cent, so operating margins were negatively impacted on that basis."

Morningstar reduced its fair value estimate earlier this month, by 8 per cent to $5.80 a share. This was in response to Boral's downgraded profit guidance for its two largest divisions, Boral Australia and North American plasterboard business, Boral USG.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Boral management blames the lower earnings and margins for the half on lower demand for concrete and project inefficiencies, along with a wet October in New South Wales.

Slade says rising energy costs also hurt margins, along with delays on various infrastructure projects, which negatively impacted sales volumes.


Boral is involved in several of Australia's largest infrastructure projects

"The upfront infrastructure pipeline has been slightly delayed, so there hasn't been a full off-setting impact on falling volumes [in residential]…it's still there, but it's just a timing issue."

He suggests the pay-off from some of these projects may not begin flowing through until 2020 or 2021.

"But there are some price increases [for Boral Australia concrete] due to come through in April, so that should help them recoup some of the losses.

"The top line for Boral is going to continue to grow in Australia, despite housing coming off," Slade says.

Boral is involved in several of Australia's largest infrastructure projects, including the WestConnex and F6 freeway extension and Sydney Light Rail in New South Wales, and the Melbourne Metro and Westgate Tunnel in Victoria.

It is also tendering for several upcoming projects due to complete after 2021, including the Western Sydney Airport.

Boral's half-year results reflect strong underlying businesses, which were impacted by adverse weather, particularly in North America, as well as project-related volume delays in Australia, said Boral chief executive and managing director Mike Kane.

"We expect to deliver growth in the second half," he told investors earlier today.

Net profit, which includes a $65.2 million gain on the disposal of two units, rose by about a third to $236.5 million.

At market close, Boral shares were trading at $4.90, down 1.2 per cent from the opening price of $5.


  • Net profit up 36.7pct to $236.5m
  • Net profit ex significant items down 6.4pct to $200.2m
  • Revenue up 1.8pct to $2.99b
  • Half-franked interim dividend up 0.5 cents to 13 cents


. Glenn Freeman is senior editor, Morningstar Australia.

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend