Boral tips housing downturn after largest price spike in years
BORAL expects a housing downturn to accelerate in the second half of the 2023 financial year as high inflation and energy costs forced it to slug customers buying building materials with the largest price jump in five years.
“On a housing downturn, I think we‘re all expecting that to happen based on feedback we’re getting from our detached housing builder customers,” Boral chief executive Zlatko Todorcevski said after delivering its annual results.
“Detached is likely to trail off in the second half of 2023. That doesn‘t concern me but I think it’s important to be prudent at the moment when you are seeing some builders go into administration or not being able to perform.”
Boral brought forward its annual material price increase to August 2022, its biggest in five years, in addition to the out-of-cycle increases set in January and February.
“These are some of the largest pricing increases by geography and by product line that we‘ve put in the market over the last five years. And I think that’s appropriate. I think it’s reflective of the inflationary environment we’re facing.”
Some customers on cheaper deals had baulked at the price rises but others had signed up for new supplies. Boral has also clamped down on discounts given to some buyers.
“There was a lot of discretion and a lot of authority within Boral given to relatively junior salespeople who were well intentioned and were trying to support their customers. We can‘t afford that,” Mr Todorcevski said.
“The worst thing we can do now is say we‘re going to increase prices and get wobbly knees when we see customers walk. We’re all holding hands singing Kumbaya at the moment because it’s unprecedented times in the industry. And what we’re focused on is holding prices and getting the realisations we need.”
The Kerry Stokes-controlled Boral saw its annual earnings plummet by a third amid construction lockdowns, wet weather and rising energy prices while forecasting higher revenue in 2023 as demand and prices pick up.
The building materials giant’s earnings before interest and tax fall 32 per cent to $107m for the 12 months to June 30.
Sales revenue edged up 1 per cent to $2.95bn while a big gain from the sale of its North American business resulted in a statutory net profit of $961m.