Once again, the March release of housing finance showed lending for housing construction rose, keeping the upward trend for the last 16 consecutive months since December 2012. It doesn't seem too far back, but it's a big difference in business to the housing construction companies and building materials companies.
New construction powers on
In March, the Australian Bureau of Statistics (ABS) trend estimates for the number of dwelling finance commitments for new and established housing were down for the month. New construction commitments were up by 1.7% and the seasonally adjusted estimate was up 2.1% as well.
There is still momentum for building materials. This finance commitment trend we see now will be for dwellings that will be built in the near-term, so it shows us the amount of work in the pipeline.
Boral Limited (ASX: BLD), maker of cement, plasterboard, bricks and roofing tiles, saw a strong profit increase in the first half of FY2014. The company said that the second half will be weaker, but it is looking to deliver about $130 million in cost savings in FY2014 and projects savings of about $150 million in FY2015.
Fletcher Building Limited (ASX: FBU) is the largest company listed on the New Zealand stock exchange and makes laminates, infrastructure materials, building products and panels. In addition, it does housing construction and product distribution through such businesses as Tradelink and PlaceMakers.
Its strongest segments in the first half were building products, distribution and construction while infrastructure was down. Interim underlying net profit was up 5.3%.
CSR Limited (ASX: CSR) manufactures such materials as plasterboard, fibre cement products, roof tiles, bricks, and glass. In the first half of FY2014, it had a tremendous increase in underlying net profit of 92%. Improved pricing and lower costs drove better earnings.
In April it announced a joint venture with CSR to combine their east coast brick operations. General brick demand has declined over the years as more units are developed. This JV will help achieve savings and efficiencies.
The housing construction industry will benefit from the lower interest rates and keep the business climate stable and growing. Building materials will rise in demand generally, so investors can look forward to higher revenues and better returns.
