The Boral Limited (ASX: BLD) share price has fallen more than 19% this morning on the back of the company’s FY19 results. Here’s what you need to know.
About Boral
Boral is an international construction material and building products business that employs more than 25,000 employees and contractors. Boral’s operations span 850 operating and distribution sites globally.
The Numbers
Boral reported revenue of $5,801 million, representing growth of 4%.
EBITDA grew by 2% to reach $1,033 million, while underlying net profit after tax (NPAT) was $440 million, down 7%.
Earnings per share (EPS) was also down 7% to 37.5 cents per share.
Boral reported that infrastructure activity remains solid but cyclical housing pressure is affecting the residential segment. According to the Australian Bureau of Statistics data referenced in the report, total housing starts are down 15% in Australia while the non-residential market is up 2%.
In the US, infrastructure and non-residential are up 6% and 2% respectively.
Dividends
Boral declared a 50% franked final dividend of 13.5 cps, bringing the full-year dividend to 26.5 cps, the same as FY18. The dividend will be paid on 1st October 2019.
Analyst Estimates
Bloomberg analysts were estimating NPAT of $437 million and a dividend of 13.4 cps. Boral beat both estimates with underlying NPAT of $440 million and a dividend of 13.5 cps.
Why Are Shares Falling?
Boral shares are falling despite beating analyst estimates. This could be due to the decline in NPAT and EPS, but there was another announcement that may be a contributing factor.
Boral announced that it has entered into an agreement with Gebr Knauf
to expand its plasterboard joint venture in Asia and Boral will return to 100% ownership of USG Boral Australia and New Zealand.
Boral will take full ownership of USG Boral at a multiple of 5.7 times FY19 EBITDA, representing an investment of US$200 million. This will be immediately earnings accretive. Boral will also pay US$241 million as part of its joint venture investment. Gebr Knauf will retain a call option to return to 50% ownership of the USG Boral Australia and NZ business.
Boral CEO and Managing Director Mike Kane said, “The expanded joint venture in Asia will be a world-class operation, bringing together Knauf – now the world’s largest plasterboard manufacturer – and USG Boral in Asia, which has an enviable position in the fastest growing plasterboard region in the world”.
Outlook
According to Boral’s report, concrete demand in Australia is predicted to decline in FY20, while asphalt demand is predicted to see growth of around 3% per year to FY22.
With low growth prospects and uncertainty in residential housing, I’d be avoiding Boral right now. I’d rather invest in one of the companies in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
