Boral increases Asian investment
Boral increases Asian investment
SYDNEY (Reuter): Australian building materials and energy group Boral Ltd yesterday pledged to invest a further A$100 million (US$79 million) in Asia in 1996/97 as part of its continuing expansion into the region.
Boral managing director Tony Berg said the company would continue to expand its foothold in China's plasterboard market, while also focussing on further development in its Indonesian and Malaysian concrete and plasterboard operations.
"We're targeting about A$100 million of investment into Asia this year. That's gross," Berg told reporters.
He was commenting after the company reported a dismal 30 percent drop in net profit for 1995/96 (July-June) to A$205.69 million and cut its final dividend to 7.5 cents a share, fully franked, from 10.5 cents.
Berg said the company's bottom line remained a casualty of the Australian housing market slump, which slashed margins in Boral's building products and construction materials businesses to 6.8 percent from 12.8 percent in 1994/95.
"Margins should be substantially higher. Our objective would be to improve it above the 12.8 (percent level)," he said.
"There are some favorable signs in some areas that prices are starting to move up."
Berg said he expected first half 1996/97 profit to be lower than a year earlier but the second half should show the benefits of the long-awaited upturn in the Australian housing market.
"The timing of the upturn in housing is not clear, but most forecasters expect an upturn in the New Year which should result in a significant improvement in second half earnings over the comparable period."
He said Boral predicted Australian housing starts to rise to 126,000 in 1996/97 from an estimated 120,000 in 1995/96.
Expected cost savings of more than A$50 million from its performance enhancement programs would also boost prospects.
Profit before abnormals slumped 45 percent to A$171 million, which was at the lower end of analysts' forecasts of between A$165 million and A$185 million.
Analysts said investors were focusing more on Boral's longer term outlook as the profit fall was largely anticipated. Near the close of trading, Boral shares were six cents higher at A$3.07 on turnover of around 4.4 million.
"It's probably going to be later in the second half before they start to see any real demand improvements," Lance Jones industrials analyst David Aylward told Reuters.
"But people have looked at this result and said 'it's a bad result but it's no worse than what we expected. There's no other problems emerging, let's get set now'."
Berg said earnings also suffered as a result of a downturn in the European housing market and an unusually severe European winter which caused a three-month building halt.
He said further divestments of non-core assets were likely in the current year with a program to reposition the group's assets expected to be completed by June 1997.
Boral's building products division posted an operating profit before abnormals and tax of A$127.09 million, down from A$246.26 million previously, while profits from construction materials slipped to A$107.47 million from A$182.34 million.
However, the energy business reported a 10 percent jump in operating profit to A$143.09 million.