Boral shakes off WA pain to deliver solid profit

Building products manufacturer Boral has maintained a solid half-year profit despite cutting 100 jobs in Western Australia last year, following a plunge in sales volumes and earnings at its Boral Bricks WA business.

Boral today announced its net profit for the six months to December 31 rose 12.3 per cent from the previous financial year, to $153.4 million.

That was despite revenue dropping 4.6 per cent to $2.09 billion, due to the completion of several large projects and accounting matters related to its Meridian brick joint venture in the US.

While Boral said it continued to benefit from strong housing markets in the eastern states, its WA operations were not as buoyant.

Boral said production at the Midland Brick facility was curtailed during the half year, after a 34 per cent year-on-year decline in brick sales.

Midland Brick shut down one of the kilns at its manufacturing facility towards the end of the 2016 financial year, resulting in 50 job losses.

Another 50 jobs were cut in the first half of FY2017 as Midland Brick scaled back its production.

Three of the Midland Brick facility’s kilns are now operating at 80 per cent utilisation.

Boral said today it had cut a quarter of its Bricks WA workforce, while it also incurred a $2 million restructuring charge in the first half of FY2017.

However, the company maintained the Bricks WA business remained profitable and that inventory levels were being managed.

Notwithstanding the WA results, Boral maintained its guidance for full-year earnings to be higher than in the previous year.

"Housing in Australia is a gift that keeps on giving," chief executive Mike Kane told reporters.

"The whole market has been amazed at the strength of the housing market. I expect it to stay at lofty levels in the next couple of years."

Earnings in Boral's Australian business actually fell in the half year, as higher volumes and pricing gains were offset by completion of work at several LNG projects, the Barangaroo project in Sydney, and the decline in WA's brick market.

But the company said there was a strong recovery in the December quarter due to dry weather.

Boral's US business posted higher earnings, helped by an ongoing recovery in housing activity and higher prices, while the USG Boral joint venture also benefited from strong housing markets.

Boral is increasing its exposure to the US market with the $US2.6 billion acquisition of building products supplier Headwaters, announced in November. That deal is expected to complete by mid-2017.