The Adbri Ltd (ASX: ABC) share price has jumped more than 7% after the company’s latest update.
Adbri is a building products business, with cement being an essential part of its operations.
Adbri’s trading update
The company said in the second half of the year, it has continued to experience “strong demand” for its products across key markets.
Adbri expects to report full-year underlying EBITDA (EBITDA explained) within the range of $310 million to $315 million, which “moderately exceeded” the outlook provided at the half-year result in August.
It also said 2023 capital expenditure is expected to be between $310 million to $320 million, lower than the $330 million to $350 million estimate provided at the half-year result.
Kwinana upgrade project
The Adbri share price may also be reacting to the update on the cement project.
The company explained the Kwinana upgrade project will deliver a “modern state-of-the-art facility” that consolidates Adbri’s two existing cement production sites.
The ASX building products business explained it’s an investment that will strengthen Adbri’s long-standing position as a sustainable, low-cost cement supplier in Western Australia.
It had invested $240 million as at 30 November 2023. It’s expected to be completed within the previously advised capital cost estimate of $385 million to $420 million and remains “on track” for the start of commissioning of key equipment from the second quarter of 2024.
Once this project is completed, the Kwinana plant will operate “at a significantly lower cost per tonne” compared to the company’s existing Western Australian cement operations. This expectation is underpinned by the lower energy consumption of the plant which reduces emission intensity by approximately 20% after the completion of the conveyor system, compared to existing operations.
Final thoughts on the Adbri share price
The Adbri share price is still significantly lower than it was in 2021 and even more compared to before COVID-19.
Australia is a country with a rapidly growing population and additional infrastructure needs. I think there is a promising future for the company, and it may be a good time to invest today, though I don’t think it’s the sort of business that is going to shoot the lights out over the long-term.
