Boral chief to ride out $44m storm

BORAL chief Mike Kane says he has no intention of stepping down early after significant financial irregularities were uncovered at a division in the US.

The heavyweight construction materials supplier has revealed it will take a hit to earnings of up to $US30 million ($44 million) as a result of the scandal.

A series of internal audits failed to detect the irregularities at Boral’s US windows plants between September last year and October this year.

They involve misreporting of inventory levels, raw materials and labour costs.

Boral flagged the irregularities in an announcement to the Australian Securities Exchange after the market closed on Thursday.

It said it was still determining whether there would be any potential ongoing financial impact beyond October this year.

Shares in the group fell heavily yesterday in the wake of the revelation, closing down 6.3 per cent, or 31c, at $4.61.

In a call with investors yesterday morning, Mr Kane said he would not quit early despite management concerns over the revelations.

“The team is gutted by this exercise,” he said.

“But I have no intention of leaving immediately. We have work to be done in North America to get this fixed. But we’re not there yet.”

Mr Kane signalled in August that he expected to retire sometime in the next two years, amid mixed results from the company’s blockbuster $3.5 billion acquisition of US group Headwaters in 2016.

It acquired the US windows business as part of that deal.

Mr Kane said yesterday that it was critical management, in partnership with lawyers and forensic accountants, determined how the problem arose.

“We want to understand how we missed this. We want to understand how it’s possible with multiple eyes looking at this that we couldn’t see it,” Mr Kane said.

“We’re going to find out what the true motives were and what was behind this.

“It is quite comprehensive and quite frankly in 46 years of business, I’ve never seen anything quite like this. But we are determined to get the answers.”

New staff in the financial division of the windows business, concerned by an upcoming internal audit, reported the financial irregularities to Boral management.

Revenue in the windows division — which includes brands Krestmark, Legacy and Magnolia — was $US158 million in the year to June, or roughly 10 per cent of that for Boral’s North American operations.

“The disclosure of this information internally came in anticipation of an internal audit … and to the extent the concern or the fear about that drove the revealing of this information, (it) played its role,” Mr Kane said.

WE’RE GOING TO GET OUT THERE AND FIND OUT WHAT THE TRUE MOTIVES WERE AND WHAT WAS BEHIND THIS

MIKE KANE