Boral hit by slow housing market

BORAL has flagged weaker profit in the coming year after undershooting expectations for its full-year profit, sending its shares tumbling more than 18 per cent.

Australia’s largest building materials maker’s underlying net profit for the year ended June 30 slumped 7.0 per cent to $440.1 million as domestic construction slowed amid strain on Australia’s housing market, dragging down a better result in its US division.

Revenue was roughly in line with the previous financial year at $5.86 billion. The result was below a consensus forecast of $476.8 million, according to Refinitiv data.

“In financial year 2020, we expect downward earnings pressure in Boral Australia as the slowdown in residential construction continues to impact and won’t be fully offset by growing volumes in infrastructure projects,” chief executive Mike Kane said in a statement yesterday.

Shares of Boral suffered their biggest intraday drop since 2009, with prices firmly down 19.66 per cent at $3.98 late yesterday, their lowest level in six years, amid a broader market sell-off.

Until recently, house prices in Australia had fallen every month since late 2017 but there have been some signs of improvement in the past two months amid back-to-back interest rate cuts and stronger interest from Chinese buyers. Boral also announced it has reached a deal with Gebr Knauf KG to buy back the German company’s 50 per cent stake in USG Boral Australia and New Zealand, returning the local business to full Boral control.

Boral is also expanding its business in Asia in a joint venture with Knauf. The twostage deal will cost Boral $654 million.