There is no sign yet of improvement in the depressed Australian housing sector, and the industry could benefit from another interest rates cut, says building products supplier Boral.
In a trading update on Monday, Boral said a continued slump in housing construction had hurt its earnings, and the company would have to further reduce costs.
Boral shares fell sharply on the news and were 20 cents, or 4.28 per cent, lower at $4.47 at 1159 AEST on Monday.
Boral chief executive Mike Kane said the continued weakness in the Victorian market especially, suggested that housing demand in Australia was “directionally challenged”.
“I don’t think it is improving at all,” he told reporters.
“As we get through this next quarter, we’ll determine whether it’s going backwards or not.
“But, I think it’s been stuck for quite some time.”
The Reserve Bank of Australia meets on Monday for its monthly consideration of whether interest rates should go up, down or stay the same.
“I’d argue to the extent that rate cuts could help the housing industry, this industry needs some help,” Mr Kane said.
Mr Kane said Boral was still trying to rapidly resize its business to match demand.
He said there was a possibility that Boral would have to axe more jobs, but cost cuts would predominantly focus on cutting divisional spending.
Earnings from Boral’s construction materials and cement division in the three months to March 31 were $19 million below the company’s forecasts.
The division’s quarterly earnings were adversely affected by declining residential construction activity in Victoria, project delays in Victoria and South Australia, and poor weather in south-east Queensland.
Some of the shortfall in the construction materials and cement division’s earnings would be offset by higher revenue from work associated with liquefied natural gas projects in Queensland and Western Australia.
Boral’s cost-cutting measures, which have already included the axing of 700 jobs across the group, also were expected to lift overall earnings for the division compared to the prior year.
Boral said its Australian building products division had reported a further fall in earnings from its timber operations as a result of the high Australian dollar, import competition, and low demand in the West Australian brick and masonry operations.
Boral expects to make a net profit of between $90 million and $105 million in the year to June 30, excluding costs related to its restructure.
