Adelaide Brighton cements in a higher profit

Adjusting for a one-off gain in the prior period, profit was up.

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Leading cement and construction material manufacturer Adelaide Brighton Cement (ASX: ABC) has reported a 4.5% increase in revenue to a record half year result of $579.3 million and a 2.9% increase in underlying net profit after tax to $60.9 million for the half year ended June. The underlying result adjusts for a one-off gain of $7.6 million received in the first half of the 2012 financial year.

The board has declared an interim dividend of 7.5 cents per share, which represents a payout ratio of 78% on earnings per share of 9.6 cents.

In the results presentation, management stated that it anticipates sales volumes for the full year to December to be similar to 2012, with a number of projects in expected to offset a continuing weak trend in residential and non-residential building demand. The company has also begun selling off land surplus to requirements. Management suggests cash from land sales over the next 10 years could approach $110 million.

Results so far this reporting season from building-related companies has been on the whole pleasing. Boral (ASX: BLD) grew both its top line revenues and its underlying profits for the year, which along with a market rumour that the firm may make a play for fellow building material supplier CSR (ASX: CSR), makes the company one to watch.

New Zealand-based Fletcher Building (ASX: FBU) also managed to eke out an increase in earnings on the back of a 4% drop in sales, helped along by the reconstruction of earthquake damaged properties in NZ.

Foolish takeaway

Annualising Adelaide Brighton's half-year result, the company is currently trading on a price-to-earnings ratio of 17 and a dividend yield of 4.6%. The company has benefitted from buoyant resource sector demand for cement and clinker while at the same time experiencing weak demand due to lacklustre building activity. With a continued slowing in resource sector demand expected, Adelaide Brighton will need building sector demand to take up the slack.

Profits for 2013 should hold up with management forecasting a full year net profit after tax in the range of $145 million to $155 million however all eyes are now on what to expect in 2014.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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