Boral (ASX: BLD) has given a FY20 trading update which has caused the share price to fall over 2%.
Boral is an international building products and construction materials business employing more than 25,000 employees and contractors, Boral’s operations span 850 building and construction materials operating and distribution sites globally.
Boral’s FY20 Trading Update
Boral said that, as expected, there has been volume pressures in several businesses reflecting softer construction activity.
The first quarter earnings in Boral Australia are lower with a slow housing market and delays in infrastructure projects. Concrete volumes were 8% lower and asphalt volumes were flat.
Disruptions at Berrima & Peppertree resulted in a negative earnings hit of $10 million. But on the positive side of things it secured supply to Wesgate Tunnel, Norfolk Island airport and Queens Wharf.
USG Boral also saw slightly lower earnings in the first quarter with a slowdown in residential construction in Australia and there has been a continued downturn in South Korea. However, this has been partially offset by improvements in Thailand and China,
In Boral North America the first quarter of earnings was slightly lower than the first quarter of FY19. There are early signs of a US housing market improvement but it’s yet to flow through, but there should be a benefit in the second half.
There were lower earnings from site services in Fly Ash as expected, but it has signed a memorandum of understanding (MOU) for a significant fly ash project.
FY20 Outlook
Boral’s FY20 full year earnings outlook remains unchanged. Management still thinks that net profit will be 5% to 15% lower in FY20 than FY19 (before additional profit from USG Boral Knauf transaction closes) due to lower earnings and higher depreciation charges.
In the first half Boral expects EBITDA (click here to learn what EBITDA means) to be 5% lower, but the second half’s EBITDA is expected to be in line with the previous year’s EBITDA before the additional profit expected from the USG Boral transaction with Knauf.
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