The Boral Limited (ASX: BLD) share price has jumped 8% after reporting a strong FY23 half-year result.
Boral is a large building products business. Investors may have seen some of its vehicles on the roads or at a construction site.
Boral HY23 result
Here are some of the highlights from the result:
- Revenue rose 12% to $1.68 billion
- EBIT (EBIT explained) increased 15% to $95.3 million
- EBIT margin improved 20 basis points (0.20%) to 5.7%
- Net profit after tax (NPAT) up 53% to $56.8 million
- Adjusted earnings per share (EPS) up 50% to 5.1 cents
- Statutory NPAT down 91% because last year included the profit on the sale of its North American building products business
- Operating cash flow up 37% to $117.4 million
- No interim dividend
The company decided not to pay a dividend because of the limited availability of franking credits and its free cash flow performance for the six months.
Boral’s CEO Vik Bansal said that it’s promising that its pricing actions gained traction, which along with volume growth and cost discipline, drove the EBIT (operating profit) higher. Excluding property, EBIT rose 23%. That’s good news for the Boral share price.
Bansal also said that the business will need to remain “highly disciplined and focused in getting price realisation from the market across the country while maintaining a disciplined approach to cost management.” He underlined that “price erosion is not an option for Boral”.
Green initiatives
There is a greater societal focus on heavy carbon emitters to become greener and have less of an impact on the environment.
Boral noted it was the first company in the global cement sector to set 2030 targets aligned with a 1.5C pathway for scope 1 and scope 2 emissions (emissions that the company is responsible for, not its customers).
In FY22, scope 1 and 2 emissions were down 8% from the FY19 baseline. The FY25 goal is an 18% reduction compared to FY19.
Boral expects to complete the chlorine bypass at the Berrima Cement plant in the fourth quarter of FY23, which will enable higher use of alternative fuels at the kiln and reduce reliance on coal. Alternative fuel could be 15% in FY22, 30% by the end of FY23 and 60% by FY25.
The company is assessing renewable electricity sources. It’s also focused on accelerating its penetration of lower carbon concretes.
Final thoughts on the Boral share price
Seeing the underlying profit jump so much has encouraged investors, particularly as the company said it expects the FY23 second half EBIT to be “broadly in line” with the first half.
I think it could be profitable to look at building product companies when the economy is seemingly on track for a downturn, and benefit from the recovery on the way up. But, seeing as it’s up over 30% in the last six months, I think that some of the ‘easy money’ has been made here simply from a recovery of investor confidence.
