Building products maker Boral is banking on further recovery for US housing but says the Australian market is too volatile to predict.
The company reported a net loss for the six months to December 31 of $25.3 million compared with a net profit of $153 million in the previous corresponding period.
However, the latest result was dragged down by $77 million of significant items that included restructuring and redundancy costs as well as impairment charges relating to the suspension of clinker production at Waurn Ponds in Victoria.
When significant items were excluded, Boral reported a net profit of $52.2 million.
In January the company announced it was cutting 700 Australian jobs as part of a restructure to deal with a prolonged housing slump.
Managing director Mike Kane said a recovery in the Australian housing market was difficult to predict as its low volumes led to volatility.
“I’ve been studying it for a little while and frankly a market that moves between anything from between 135,000 and 170,000 (housing starts) doesn’t require much adjustment to have rather wild swings in impact on our business,” he said.
“The reality is it’s come up from a low point of last year.”
“I can’t assume it’s going to get much better and therefore most of my analytics around the second half I’ve got to assume it’s a steady stayed from probably where we are right now.”
The Australian Bureau of Statistics has said the number of people applying for home loans slumped for a third straight month in December.
Mr Kane said the recent floods in Queensland and northern NSW were not of a long enough duration to have a significant effect on the business and he expected any losses to be recouped in the next few months.
He said he was pleased, especially as Boral’s former head of US business, to see an American housing recovery and expected the improvement would show in the company second half results.
Revenues from Boral US were nine per cent higher and earnings before interest and taxation improved by $12 million with first half losses reduced to $39 million.
“We are expecting improved performance in the second half (in the US) particularly in the fourth quarter.”
IG Market analyst Evan Lucas said the result was not a surprise as Boral had forecast it last month.
Mr Lucas said the market would be closely watching how Boral performed in the second half as the US housing market improved and the outcome of the restructure became clearer.
Boral shares were 5.0 cents, higher at $4.92 at 1444 AEDT.
