Strong and improved profits from Boral's Australian construction materials were offset by a significant decline in US housing-related earnings as well as reduced earnings from Australian building products due to continued weakness in Australian dwelling activity.
Sales revenue of $4.9 billion was up 3% due to price strength, stronger construction materials volumes and growth initiatives. Earnings before interest, tax, depreciation and amortisation (EBITDA) of $762 million were down $61 million because of a volume-driven $90 million decline in EBITDA from Boral's US operations.
Earnings per share for the year were 50.0 cents.
A fully franked final dividend of 17.0 cents per share has been maintained, which will be paid on 18 September 2007.
Boral's CEO & Managing Director, Rod Pearse, said: "Boral's Australian EBITDA of $605 million was 6% higher than the prior year, with earnings from construction materials 11% stronger on the back of major infrastructure project work and non-dwellings activity particularly outside New South Wales. Price gains and growth initiatives also benefited the result. Despite this, ongoing weak Australian dwelling activity, especially in New South Wales, continued to adversely impact earnings negatively affecting volumes and manufacturing costs. Offshore EBITDA decreased by $98 million (or 40%) to $150 million as a result of a severe downturn in single family home construction across all major US markets which negatively impacted shipments in Boral's US brick and roof tile businesses. In Asia, conditions improved in a number of key plasterboard markets, whilst construction materials markets remained challenging."
Commenting on Boral's outlook, Mr Pearse said, "In 2007/08 we expect Australian dwelling commencements to be around 145,000-150,000 starts compared to the estimated 149,000 starts in 2006/07. This is well below underlying demand levels of around 170,000 starts. Building Products results are expected to soften as result of the weakness in dwelling volumes.
"We expect earnings from our construction materials businesses in Australia to continue to improve as a result of an anticipated increase in non-dwelling and infrastructure activity in 2007/08 and the continued flow through of concrete and quarry price increases that were implemented effective 1 April 2007.
"We anticipate that Quarry End Use earnings in 2007/08 will be around $50 million which will again be weighted heavily to the second half of the year.
"In the USA, forecasters currently expect housing starts to be around 1.4 to 1.5 million starts in the 2007/08 financial year, which equates to around a 3% to 10% decline year on year; this will reduce brick and roof tile sales and production volumes and earnings compared to 2006/07 levels. Our recently announced construction materials acquisitions in Oklahoma City will positively impact US EBITDA by around US$12 million.
"In Asia, we expect growth despite competitive market conditions for the remainder of 2007/08.
"Growth initiatives will progressively deliver improved benefits particularly as markets recover and operating cost improvements from performance enhancement programs of around 3% have been targeted," concluded Mr Pearse.
Boral will provide an update on trading conditions at its Annual General Meeting on 29 October.
For further information:
Rod Pearse, CEO & Managing Director (02) 9220 6490
Kylie FitzGerald, General Manager Corporate Affairs (02) 9220 6390 or 0401 895 894