Boral share price falls as underlying FY22 profit slumps 26%

The Boral Limited (ASX: BLD) share price is in the red after the company released its earnings for financial year 2022.

The S&P/ASX 200 Index (ASX: XJO) building products and construction materials company’s stock opened at $2.81 – marking a 2.7% fall.

It has since improved slightly to reach $2.865 – 0.87% lower than its previous close.

Boral share price slips as profit tumbles

Here are the key takeaways from the company’s full-year earnings from continuing operations:

• Revenue came in at around $2.95 billion – a 1% improvement
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) slumped 19% to $330 million
• Earnings before interest and tax (EBIT) fell 38% to $112 million, or 32% to $107 million excluding property
• Underlying after tax profit came to $35 million – down 26%
• Posted a statutory net loss of $17 million – down from a $19 million profit
• Adjusted earnings per share (EPS) came to 13.6 cents

The company’s earnings were impacted by external conditions, including increases in energy prices and cartage costs – resulting in a $58 million dint. Its sales were hit by the impacts of exceptional rainfall and construction shutdowns.

All such negative happenings ultimately dinted EBIT by $136 million, offsetting the benefits of higher revenue and transformation initiatives.

Looking at the company’s total earnings, it recorded a statutory net profit of $961 million – marking a 50.1% improvement. Boral recognised a pre-tax gain of around $1.03 billion for significant items, mostly relating to profit from the sale of non-core North American businesses.

Meanwhile, its transformation program brought a $42 million benefit – below its targeted $60 million to $75 million. It was impacted by delays from COVID-related supply chain impacts and higher cost inflation.

What else happened in FY22?

Of course, the major news from Boral in financial year 2022 was of Seven Group Holdings Ltd (ASX: SVW)’s battle to take over the company.

Seven ultimately walked away with a near-70% stake in Boral, paying a price of $7.40 per share for the holding.

Boral also divested its non-core Boral North America and Australian Building Products businesses and underwent a $3 billion capital return. The capital return encompassed a $2.65 per share capital reduction and a 7-cent special dividend.

What did management say?

Boral CEO and managing director Zlatko Todorcevski commented on the company’s earnings, saying:

Boral’s revenue benefited from stronger infrastructure and residential activity. However, industry-wide construction lockdowns and exceptional rainfall … curtailed volumes and significantly impacted margins. In addition to reducing operating efficiency, these events resulted in additional operating and repair costs.

With supply chain constraints and labour shortages remaining a key issue across the industry, major projects continued to experience delays. However, we expect momentum to improve in FY2023, and to benefit from several key projects we’ve secured including the Western Sydney Airport terminal, Sydney Metro West – Central Tunnel Package, Sydney Metro West – Western Tunnel Package, and Tonkin Gap in Western Australia.

What’s next?

The company hasn’t provided any new earnings guidance for financial year 2023. Though, it did outline its expectations for the period.

Boral expects its revenue to increase this fiscal year, driven by price growth and increased volumes. It believes infrastructure demand will increase, offsetting a predicted softening of detached housing demand in the second half. It also believes benefits from price increases and performance improvement initiatives will more than offset the impact of total cost inflation, while energy costs remain elevated.

The company’s financial year 2023 capital expenditure is expected to be around $235 million.

Boral share price snapshot

The Boral share price appears to have had a disastrous year on paper – falling 53% over the course of 2022 so far and 58% over the last 12 months.

However, that doesn’t account for the capital reduction and special dividend undergone in February.

The post Boral share price falls as underlying FY22 profit slumps 26% appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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