Major project delays cost Boral

We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.

Advertisement

This was published 11 years ago

Major project delays cost Boral

By Philip Wen Construction

BUILDING materials supplier Boral has slashed its profit forecast for the second time in three months, just weeks after showing the chief executive Mark Selway the door halfway through its restructure and turnaround project.

Shares in Boral fell as much as 7.5 per cent yesterday to a post-financial crisis low as the company said persistent weakness in residential construction, bad weather and further delays in the major resource sector and road construction projects would see its full-year net profit fall short of previous guidance by at least $28 million.

Shares in Boral closed 6¢, or 1.9 per cent, lower at $3.13 yesterday.

Boral now expects full-year net profit to be between $100 million and $110 million. It had originally forecast a full-year net profit of $150 million to $175 million, and downgraded that guidance by $22 million in April. But even reaching the most recent profit target will rely on two property sales, worth $20 million to $24 million, going through by year-end.

The company had hoped the properties would fetch about $33 million.

Boral's rapidly deteriorating numbers have sparked alarm among building sector analysts who had tipped an imminent recovery in the residential building cycle.

But analysts at Nomura, led by Simon Thackray, said things were more likely to get worse before they get better, and that the market consensus of close to $200 million in net profit was too optimistic. Nomura is forecasting $168 million.

''Looking ahead to 2013, we believe risk of further downgrade remains strong, with the market yet to catch up to the fact that market conditions are likely to deteriorate further from this point,'' Mr Thackray said.

Boral has told analysts that about two-thirds of the latest profit downgrade was a result of delays to two major projects - the Gladstone LNG project in Queensland and the Peninsula Link in Victoria.

The heavy pressure on earnings and Boral's hefty US private placement debt has aroused speculation it could be forced to undertake a dilutive capital raising - talk that the interim chief executive, Ross Batstone, was quick to nip in the bud.

Advertisement

"Based on our current strategy and plans, we do not expect there will be any need for additional equity raising in the short to medium term,'' Mr Batstone said. ''Boral continues to operate comfortably within its banking covenants.''

Despite Mr Selway's departure last month, Boral has said it will persist with the turnaround project that he had begun to implement.

''Boral's underlying strategy remains sound,'' Mr Batstone said. "We continue to focus on our core strategies, the integration of the acquisitions made during the first half of the year and the divestment of non-core businesses.''

Most Viewed in Business

Loading