Construction giant flags further price rises amid housing squeeze
By Jessica Yun
Australia’s largest building and construction materials supplier will continue to push up the price of cement, gravel and asphalt in the new financial year as soaring interest rates keep a lid on the construction of new homes.
Kerry Stokes-backed Boral’s net revenue rose 17 per cent to $3.5 billion while earnings jumped 38 per cent to $454.4 million in the year to June 30. Operating cash flow lifted 65.5 per cent to $358.7 million.
Boral is Australia’s largest building and construction materials supplier.Credit: Fairfax/Nine
The company’s statutory net profit after tax came in at $148.1 million for the 2023 financial year, a fall from $150 million in the previous year, which also included a post-tax income of $977.6 million from the sale of its North America business. It will not pay a dividend.
Stokes, the chairperson of Seven Network, has a 72.6 per cent stake in Boral.
Chief executive Vik Bansal reiterated expectations that cost pressures – including on transport, wages and energy – would linger for the next 12 to 18 months, which Boral would pass onto its customers, but signalled the increases wouldn’t be as steep as last financial year.
“There will be price increases because cost will increase. I just want to make sure that’s very clear,” Bansal told investors and analysts on Thursday. “I’m not saying the price is going to remain steady. All I’m saying is the rate of increase will slow down.”
Bansal said he was bullish about starting the new financial year and that there was a good project pipeline from the “second half onwards”.
“I think resi[dential] is going to come back as well. Commercial is going to come back and so is infrastructure. Infrastructure will move, both in engineering infrastructure, as well as social infrastructure.
“I remain very optimistic for [the] future. I’m generally not worried about the volume in [the] medium long term at all.”
Investors cheered the update, sending the share price 8.5 per cent higher on Thursday.
Boral CEO Vik Bansal says he is bullish about starting the new financial year.Credit: Louie Douvis
Boral is a major supplier of construction materials and a key player in the building and infrastructure industry. The company operates more than 300 heavily industrialised sites across the country, making concrete and cement, quarrying stone, recycling construction and demolition waste, and processing asphalt and bitumen for roadworks.
The $5.1 billion company is on the frontlines of the construction sector, which has suffered a slowdown as interest rates dampen investment appetite. New home building approvals fell by 7.7 per cent in June, while higher-density home-building approvals dropped by 21 per cent. The Albanese government is now facing growing calls to address housing affordability and the shortage in housing supply.
Boral expects to deliver underlying earnings (before interest and taxes) of between $270 million and $300 million this year.
Bansal took the top job at Boral in October last year, declaring he wanted to instil greater “discipline and rigour” in the leadership team.
He said some concrete batching plants were not making money, but he was determined for every segment of the business to be in the green, saying “they should be, they must be, they will be profitable”.
Moody’s Investors Service vice president Saranga Ranasinghe said the full-year figures were “credit positive” for the group.
“Despite a challenging cost environment, earnings and margins improved due to disciplined cost management, price increases, and volume growth across all product categories,” Ranasinghe said in a note.
“Boral continues to employ a disciplined financial policy and repaid around $600 million of debt during the period, further strengthening its balance sheet. Boral also has strong liquidity with significant cash and undrawn facilities and no near-term maturities.
“We expect Boral to continue to benefit from the strong pipeline of planned infrastructure projects over the next 12 to 18 months. However, risks exist given our expectation of continued inflation above long-term average levels, project delays and a weaker environment for residential construction.”
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