Boral’s disappointing result

Boral's disappointing result

Building materials company reports $212 million loss

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 21, 2013 12:31 pm AEST

Building and construction materials manufacturer and supplier, Boral Limited (ASX:BLD) has reported a disappointing result for the 2013 financial year.

Hampered by extremely weak conditions in the local construction market, Boral has reported a $212 million loss, compared to a $177 million profit in the prior year. Excluding significant items, underlying profit came in at $103 million, in line with the company's guidance and 3% higher than 2012.

The Construction Materials & Cement division saw a 16% in earnings before interest and tax (EBIT), to $281 million, but revenues in the second half were flat on the previous corresponding period, suggesting this business is unlikely to match the jump in EBIT in 2014.

The Building Products division produced a loss of $40 million, blowing out from a $5 million loss last year, as the company sold fewer bricks and tiles, and at lower margins. The Timber sub-division saw EBIT drop an alarming 19%, while Boral's US business saw a 23% improvement in EBIT, but still reported a loss of $64 million, as revenues rose 11%.

Boral expects to see similar activity in the construction market in Australia in 2014 as it saw this year, but expects Boral USA to break through to profitability in the second half as the housing recovery in the US continues.

Foolish takeaway

For Australia's building materials companies including Boral, Brickworks Limited (ASX:BKW), Fletcher Building (ASX:FBU) and Adelaide Brighton (ASX:ABC), 2014 doesn't appear to herald a return to positive growth in the building and construction sectors. Companies may need to focus on driving down their costs to improve their profitability over the next couple of years.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

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