The Boral Limited (ASX: BLD) share price has come under pressure on Friday following the release of its full year results.
At the time of writing the building products company's shares are down 1% to $3.80.
How did Boral perform in FY 2020?
It was a very difficult year for company, culminating in a previously announced net non-cash impairment totalling $1,316 million.
For the 12 months ended 30 June 2020, Boral recorded a 2% decline in sales revenue from continuing operations to $5,728 million.
Things were much worse for its earnings. Boral reported a 30% decline in earnings before interest, tax, depreciation & amortisation (EBITDA) to $710 million. EBITDA from continuing operations came in at $715 million, down 29% and reflecting lower EBITDA from all three divisions.
Boral Australia posted a 5% decline in revenue and a 25% reduction in EBITDA to $447 million. This reflects lower pricing outcomes, higher costs, and lower production.
Boral North America wasn't any better, with revenue down 2% to US$1,566m and EBITDA down 32% to US$188 million. This was driven by lower sales volumes, higher costs, and ~80% of plants experiencing COVID-19 related volume impacts and disruptions.
It was a similar story for the USG Boral joint venture. Its underlying revenue was down 8% to $1,474 million and EBITDA was down 25% to $190 million. This reflects housing downturns in South Korea and Australia, price declines in South Korea, and a significant impact from COVID-19 related plant closures and production slowdowns.
This ultimately led to Boral reporting net profit after tax before significant items of $181 million, down 57% on the prior year. Including significant items, the company posted a statutory net loss after tax of $1,139 million.
In light of this, no final dividend will be paid by the company.
"Challenging year."
Boral's new CEO & Managing Director, Zlatko Todorcevski, commented: "Boral's FY2020 results reflect a particularly challenging year. Following the lower than expected first half result from Boral North America, Boral had a difficult start to the second half of FY2020."
"Boral Australia was impacted by bushfire and flood-related events in Australia, resulting in significantly lower volumes and higher costs. This was quickly followed by COVID-19 disruptions, resulting in higher costs and production curtailments, which substantially reduced earnings for all divisions. Overall, second half margins were substantially down, as flagged in the Company's market update in May, due to lower sales and even lower production volumes together with an unfavourable shift in the sales mix and cost," he added.
Will things be better in FY 2021?
While no guidance has been provided for FY 2021 due to the uncertain economic environment, management did reveal that its performance is improving.
Mr Todorcevski said: "We have started FY2021 with lower revenues but only slightly lower earnings relative to the same time last year. Overall, EBITDA margins in July recovered relative to 2HFY2020 and were broadly in line with 1HFY2020."
"We are experiencing less disruptions in most businesses, providing an opportunity for improved outcomes, however, there is potential for further disruptions and uncertainty remains. For example, it is unclear how long stage 4 lockdowns in Melbourne will continue. At this stage of the lockdown, concrete volumes in our Melbourne metro business are down ~20% relative to last year. "
"In the USA, we are seeing a pleasing start to the year, with evidence of demand strengthening and July sales volumes improving relative to recent months. However, sales are still down year on year and there is considerable uncertainty around the economic recovery and the ongoing disruptions associated with COVID-19, including a high level of absenteeism in a number of businesses and the industry more broadly, which is impacting operations and lead times."
Management also advised that it is currently completing a review of Boral's portfolio of businesses to assess the market outlook, competitive position, and earnings potential of each business. A further update on this will be given in October.
