About Boral Limited

Boral is an international building products and construction materials business that employs more than 25,000 employees and contractors. Boral’s operations span 850 operating and distribution sites globally.

Boral’s FY19 Results

Boral reported revenue of $5,801 million, which represents growth of 4%. EBITDA grew by 2% to reach $1,033 million, while underlying NPAT was $440 million, down 7%.

In addition, earnings per share (EPS) was down 7% to 37.5 cents per share.

The company stated that infrastructure activity remains solid, however, cyclical housing pressure is affecting the residential segment. According to 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%.

Conversely, 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 1stOctober 2019.

The Rask Finance video below explains dividends:

Analyst Estimates

Bloomberg analysts were estimating NPAT of $437 million and a dividend of 13.4 cps. Boral beat both estimates, reporting underlying NPAT of $440 million and a dividend of 13.5 cps.

Why Is The Boral Share Price Plummeting?

Despite beating analyst estimates, the Boral share price has gone into free fall. Although this could be due to the decline in NPAT and EPS, 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 5.7x 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 Managing Director and CEO 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”.

FY20 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’ll be steering clear of Boral right now.

Disclosure: At the time of writing, Max has no financial interest in any of the companies mentioned.