http://www.smh.com.au/news/Business…be-flat-analyst/2007/07/10/1183833486563.html
Boral’s 2008 profits to be flat
July 10, 2007 – 12:49PM
Australia’s largest building and construction materials supplier, Boral Limited, is expected to report a flat profit in 2008, with a lift in performance anticipated in 2009, say analysts.
In a report released on Tuesday by investment bank UBS, building materials analysts slashed their estimates of the company’s performance on the back of weak US profits and disappointing housing data in NSW.
“USA profits look as if they will be weak and last month’s housing data for NSW was disappointing,” the report said. “As a result, estimates are cut to show a flat 2008 profit.
“We assume a recovery in 2009.”
Boral had earlier forecast a recovery in 2008 for the US and NSW housing markets, two key markets for the timber, cement and plaster board supplier.
When contacted by AAP, Boral said it would not comment on the UBS predictions, given that the company was to deliver its full year results next month.
“We won’t give any comment on outlook,” a media spokesperson said.
UBS said it expected Boral to make a comeback in 2009, as it was well positioned to benefit from the increased demand when it happened in both Australia and the US.
“Significant investment in manufacturing capacity should stand the company and investors in good stead when demand is there,” said UBS.
Analysts at UBS also said the demand for building materials in Western Australia remained robust, although housing affordability was “a major issue”.
The company was facing competition from its non-listed rival, the Buckridge Group, which was building capacity in WA and had recently started acquiring second hand kilns from eastern Europe.
“Clay brick penetration at 95 per cent of new detached housing is an excellent market for Boral, but one that is unlikely to get better and where there are some risks around the Buckridge Group’s second hand new entry,” analysts said.
But they believed Boral had greater long term value than implied by the “substantially lower” US earnings in the short term.
Boral’s chief executive, Rod Pearse, had said in February that the recovery in the NSW and US markets would be gradual and, in NSW, the peak would be around 2010 or 2011.
In November, he said it looked like the recovery would be in the 2008 calendar year, although it was “hard to tell”.
Boral has been rumoured as a target but, last October, in response to a stock exchange query, the group quashed a rumoured bid from Cemex, the Mexican cement company which is just millimetres away from moving to full acquisition of Australian building materials maker, Rinker Group Ltd.
Cemex on Tuesday said it had gained 89.76 per cent of shareholder acceptances for its $US14.25 billion ($A16.63 billion) takeover of Rinker.
Shares in Boral at 1138 AEST were down five cents to $8.48.
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