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Boral Ltd  – FY21 Result Shows A Recovery In Earnings

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Boral Ltd (ASX: BLD) is an international building product and construction materials company. Boral has three main divisions: (1) the materials business of Boral Australia (USG Boral); (2) the plasterboard joint venture in Asia, Australia and the Middle East; and (3) Boral North America products and flies ash business. Boral has a market capitalisation of A$7.1 billion. Around 70% of Boral shares are owned by Seven Group Holdings Limited (SGH) as a result of their recent takeover offer priced at A$7.40.

 

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What did Boral announce today?

Boral announced a net profit after tax before significant items of A$251 million, up 44% on the prior year. The decline in total operations revenue (down 7% on FY20) and sales revenue from continuing operations (down 6%) was due to lower volumes and softer prices. Boral also reported a post-tax gain of A$389 million for significant items primarily relates to the profit on the sale of Boral’s 50% interest in USG Boral as well as the Midland Brick business (net of costs).

Boral will pay no final dividend for FY21. Following receipt of proceeds from the divestment of Boral North America Building Products, Meridian Brick and the Australian Timber business, Boral will have a significant surplus of capital. Boral indicated that subject to prevailing conditions and other reinvestment opportunities, surplus capital will be available for distribution to shareholders taking into account the availability of franking credits and the prevailing share price.

 

What is the outlook for Boral?

Boral provided no quantitative guidance for FY22. This reflects that Boral is in the transformation from a company with businesses in North America, Asia and Australia to a company with solely an Australian construction materials business. As part of this transformation, Boral announced that it is in the final stages of divesting its North American Fly Ash business. Boral is also seeking to improve the performance of the Australian business, targeting an uplift in EBIT of A$200 to A$250 million in the Australian business by 2025, Boral indicated that it has already delivered A$75 million of this target. The success or failure of this strategy will drive the medium-term outlook for Boral.

 

What is the market reaction?

The market reaction to Boral’s announcement is negative. Boral’s share price has been weakening since the lapse on 29 July 2021 of Seven Group’s takeover offer priced at A$7.40. Boral is currently trading at A$6.24. Boral trades on a forward P/E ratio in the low-thirties and a dividend yield of around 3%.


Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purposes only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceedings. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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