ASX 200 mining shares have started the year well in 2022. They are flourishing while undercurrents of inflation, monetary policy, and interest rates continue to play havoc for equity investors.

The S&P/ASX 300 Metals & Mining Index (XMM) has spiked more than 8% since trading restarted on January 4, well ahead of the benchmark index.

One such share fitting the mould in 2022 is Northern Star Resources Ltd (ASX: NST), the gold miner that reported results last Friday. It declared a record dividend in the process.

As a result, one top broker has tipped Northen Star shares to sprout higher in 2022. Let’s take a look.

Why’s this ASX 200 mining share tipped to explode in 2022?

According to analysts at investment bank Jefferies, Northern Star is well-positioned to deliver growth and value to investors this year.

From its most recent results, Northern Star grew profits after tax by 43% to $261 million, after growing revenue by 63% to $1.8 billion for the half.

Importantly, the broker notes, the jump in turnover came about from Northern Star selling more than 60% more gold compared to the same time last year.

It sold 477Koz of gold from its mine at Kalgoorlie, another 212koz from its Yandal site, and 90koz from the Pogo operation.

The jump in sales and carry through to profit and free cash flow enabled the board to declare a record dividend of 10 cents per share on a payout ratio of 27% of earnings.

What do brokers think?

Given this momentum and the broker’s own analysis, Jefferies reckons Northern Star has set its guidance conservatively and it sees the potential for further revisions upward later this year.

Northern Star can deliver outsized production due to ongoing improvements at its Kalgoorlie sites, alongside other positive updates from its other sites, Jefferies notes.

As a result, the broker recommends the stock a buy and values Northern Stat at $14 per share, signalling a potential upside of 52% should the thesis play out.

Meanwhile, the team at JP Morgan is also heavily bullish on Northern Star, noting that it “remains our key pick, with the deepest discount to valuation and comparables”.

“NST has a strong balance sheet and is generating solid [free cash flow] FCF at current gold prices. The company is focused on three production hubs – Kalgoorlie and Yandal in Australia, and Pogo in Alaska,” analysts noted in a recent update.

“The company has a track record of project delivery and strong production growth. We have an Overweight rating, based on valuation.”

JP Morgan values Northern Star at $11 per share, slightly behind Jefferies but heavily bullish nonetheless.

Quick summary on Northern Star shares

This ASX 200 share has fallen almost 24% in the last 12 months and is down a further 2.5% this year to date.

In the last week, investors have regained confidence and have sent shares more than 7% higher. The company’s share price closely tracks the price of gold because it is a price taker, as shown in the chart below.

The post Top broker tips 50% upside for this ASX 200 mining share appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Record dividend: Northern Star Resources (ASX:NST) share price climbs on half-year results
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• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Zach Bristow 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 Bruce Jackson.

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Shares in gold mining giant Newcrest Mining Ltd (ASX: NCM) have started the week trading up more than 5%. At the time of writing, the Newcrest share price was fetching $23.92 in morning trade on Monday.

Newcrest fell hard in late January following the release of its quarterly report for the three months ending 31 December 2021.

Investors dumped the stock and, consequently, it bottomed at 52-week lows of $21.50 to close the month. Prior to that, it had been rangebound, with no real price action up or down since August.

The tug-of-war continues today. But one broker reckons Newcrest has a few tricks up its sleeve in order to drive value for shareholders once more. Let’s take a look.

Newcrest to repurchase shares in 2022?

According to analysts at Credit Suisse, investors should consider the possibility of Newcrest approving a share buyback program over the coming periods.

Share buybacks have picked up in recent years. S&P Global reported that 2021 was a record year for companies repurchasing their own stock.

In the United States for instance, during the third quarter of 2021, share repurchases were worth $234.6 billion. That’s an 18% gain from the previous quarter and 130% on Q3 2020.

Credit Suisse analysts reckon that a buyback approval would add incremental value for shareholders. They also think it’s feasible, seeing as Newcrest is well capitalised to put the cash aside.

“Whilst NCM has plenty of capital expenditure ahead to fund its high returning growth pipeline, it can comfortably fund this in our view,” the broker said.

Although, the investment bank remains cautious on the integration of new chief financial officer Sherry Duhe. It notes the board might be more conservative in its capital budgeting for a smooth transition.

If this were to occur – and Newcrest was to commit to buying back its own stock – Credit Suisse reckons the gold miner could then instigate the program in August, when it reports full-year results.

Nevertheless, the broker is heavily bullish on Newcrest shares and values the company at $30 per share. It is joined by analysts at JP Morgan, Macquarie, Barrenjoey, Morgans, Shaw and Partners, Morgan Stanley, and Jefferies.

In fact, according to a list of analysts obtained from Bloomberg Intelligence, almost 70% of analysts covering the gold miner have it as a buy right now with an average price target of $28.86.

Newcrest share price snapshot

In the last 12 months the Newcrest share price has lost nearly 8% and is down 2.29% this year to date following its drop in January.

As such it has slipped 3% in the last month, but has regained support lately and climbed 6% into the green in the last week. Newcrest’s share price closely tracks the movements of the price of gold, as shown in the chart below.

The post Is Newcrest Mining (ASX:NCM) set to start a share buyback in 2022? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Monday
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• Morgans names the best ASX resources shares to buy in February

Motley Fool contributor Zach Bristow 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 Bruce Jackson.

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The CSL Limited (ASX: CSL) share price has started the week in the red.

In late morning trade, the biotherapeutics giant’s shares are down 2% to $243.68.

Why is the CSL share price falling today?

The weakness in the CSL share price today could have been driven by a note out of S&P Global Ratings, which appears to have overshadowed the completion of its share purchase plan.

According to the note, the ratings agency has affirmed its ‘A-2’ short-term rating on the company with a negative outlook. The latter suggests that a downgrade to its rating could occur in the future.

S&P commented: “The negative outlook reflects our view that the incremental debt burden to part fund the [Vifor] acquisition will cause leverage to increase above adjusted debt to EBITDA of 2.0x. It also reflects the view that the company’s credit metrics could remain above our tolerances for the ‘A-‘ rating level if it experiences any unexpected operational issues or if the integration benefits from the Vifor acquisition are not realized in a timely manner.”

Share purchase plan completes

In other news, this morning CSL announced the completion of its share purchase plan.

The release notes that the company has raised $750 million at $253.57 per new share. This represents a 2% discount to the five-day volume weighted average CSL share price up to and including the closing date of the share purchase plan.

These funds will be used to support the proposed acquisition of Vifor Pharma.

The company revealed that the share purchase plan received strong support from eligible shareholders, with a total of 56,180 individual holders participating. Valid applications totalled $942.7 million, which meant the offer had to be scaled back.

CSL’s Chief Executive Officer and Managing Director, Paul Perreault, commented: “We are delighted with the strong support we have received for the acquisition of Vifor Pharma from our shareholders. On behalf of the Board, I wish to thank all shareholders who participated in the SPP. We look forward to delivering on the exciting growth opportunities underpinning the acquisition of Vifor Pharma.”

The post What’s going on with the CSL (ASX:CSL) share price today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. 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 Bruce Jackson.

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Commonwealth Bank of Australia (ASX: CBA) is continuing on its path of technological innovation.

If you own CBA shares, here’s the latest tech move from the big 4 bank.

What tech hub is CommBank moving into?

CBA reported that it is opening a Technology Hub at the Entrepreneur and Innovation Centre in Adelaide’s Lot Fourteen development.

The bank said the new hub will see it grow its technology workforce and partner with education and industry. CommBank expects to hire as many as 150 tech specialists over the next 5 years, including software engineers, data scientists and cyber security specialists.

Commenting on the development, Brendan Hopper, CIO for Technology at CBA said:

We want to be involved in providing amazing opportunities for career development and innovation – both for new entrants to the technology sector through our graduate, intern and technology associates programs – and also via reskilling opportunities for people who are already in the ever-changing technology sector.

The bank said the focus will be on artificial intelligence, data and cyber security.

It noted that the pandemic has altered the way people view their work, saying many tech workers don’t want to spend every day in an office, yet they do want to remain connected with colleagues.

Enter the new Technology Hub where CBA’s workforce can gather as required to drive technological innovation for the bank.

“Keeping employees connected in person is in some cases a major factor of innovation, learning, collaboration and passion,” Hopper said. “Lot Fourteen has the ingredients to be a major centre for technological innovation, collaboration and helping Australia advance towards becoming a more digital economy,” he added.

Adelaide’s Entrepreneur and Innovation Centre is scheduled to open in 2024.

How have CBA shares been performing?

CBA shares are up 1.2% in morning trade today, leaving the share price down 2.7% in the new year.

By comparison the S&P/ASX 200 Index (ASX: XJO) is up 0.2% today and down 4.8% year-to-date.

The post Own CBA (ASX:CBA) shares? Here’s the bank’s next big tech move appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market will crash again. It’s not a question of whether, but rather when. Perhaps the biggest near-term risk is that high and still rising inflation might provide the push that causes the next major drop. How? Well, the Federal Reserve’s expedited meeting scheduled for Monday might lead to faster and more aggressive tapering than the market already expects. That could cause a shift out of riskier assets like stocks, leading to a market correction.

Whether or not that particular scenario comes into play, the reality is that stocks can go down as well as up. If you recognize that and plan for it appropriately, you can make it through a mere market crash — and emerge on the other side in a great spot to ride any subsequent recovery.

With that in mind, here are four reasons not to worry about a stock-market crash.

1. You don’t need to sell your stocks today

As a general rule, you should not have money invested in stocks that you expect you’ll need to spend within the next five years. If you have followed that guideline, it becomes much easier to stomach a market crash. It’s still not fun, but you can make it through.

After all, if you don’t need the money immediately, then you don’t have to sell shares when they’re low just to cover your bills. That gives you the chance to not only hold on through a crash but also to potentially add more to strong companies while they’re near their cheapest. The ability to buy low — instead of selling low — allows you to end up in a better spot once the crash passes.

2. You have emergency money stocked away, just in case

One of the bigger risks most people face when the market crashes isn’t the crash itself, but rather the fact that a down market is often linked to job losses. Even if you fully intend to hold on to your stocks through a crash, if you find yourself without a paycheck and with no cash buffer, you could wind up needing to sell due to that job loss.

A three- to six-month emergency fund buys you time to both look for another job and figure out ways to cut costs before you feel forced to sell your shares. It’s a buffer that can come in incredibly handy in a tough environment. It’s also one of those things that you hope you’ll never have to use — but if you do, you’ll be incredibly glad it’s there when you need it.

3. You own strong companies that still pay their dividends

The beauty of a stock’s dividend is that it tends to get paid based on the underlying company’s ability to generate cash, rather than on the stock market’s short-term mood. When companies continue to pay their dividends in a down market, that helps investors in a number of ways.

First, the cash itself can be used to buy more shares while they’re down — either of the company that paid the dividend or of a different one that looks like a compelling value at a low price. That cash becomes available without you having to sell stock or somehow scaring up money from another source, which can be comforting if you’re a bit nervous about the future.

Second, the fact that companies continue to make their payments from available cash flows can provide a calming effect for investors, even as the market appears to panic around them. After all, there’s nothing quite like cold, hard cash to remind people that there’s a business behind each stock. If a dividend is still supported and getting paid, it means there’s still a successful company there, no matter what the stock price might say at the moment.

4. You have a value investor’s mindset

Ultimately, a share of stock is an ownership stake in a business. If that business is currently profitable and expected to remain that way, each share is certainly worth something. Value investors recognize that a company’s intrinsic worth is based on its ability to generate cash over time, and not simply on what the market thinks its shares should be priced at today.

As a result, a market crash can make great companies’ shares available at a price below what those value investors believe they’re really worth. That sort of pricing turns value investors into aggressive buyers during a crash and it’s a key part of the strategy that helped Warren Buffett earn and expand his fortune.

Especially when combined with the first three reasons not to worry about a stock-market crash, this fourth reason can actually give you an opportunity to profit from one. After all, if you’ve got the cash to ride out the decline and the wherewithal to buy near the lows, you have the opportunity to make some serious coin in any subsequent recovery.

Are you ready for the next crash?

While these four factors can help you make it through a market crash with much less worry, they all work much better if you have them in place before you need them. So start getting your plan in place today. That way, you’ll be in a much better place the next time the market crashes.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 4 reasons not to worry about a stock market crash appeared first on The Motley Fool Australia.

More reading

• Here’s why the Baby Bunting (ASX:BBN) share price has dived 5% in 2 days
• Here’s why the Westpac (ASX:WBC) share price is storming higher today
• Zooming ahead: Carsales (ASX:CAR) reports strong results amid COVID-19 traffic growth
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Chuck Saletta has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Baby Bunting Group Ltd (ASX: BBN) share price closed lower on Friday, down 3%, following the release of the company’s half year results.

Baby Bunting shares had opened Friday at $5.55 per share, but ended the day trading at $5.27.

At the time of writing, the shares are fetching for $5.25, bringing the loss since Friday’s open to 5.4%.

Below you’ll find the highlights from the company’s results for the half year ending 31 December (H1 FY22).

Baby Bunting share price dips despite dividend bump

• Total sales of $239.1 million, an increase of 10% from the prior corresponding half year
• Pro forma earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 18.6% year-on-year to $21.8 million
• Pro forma net profit before tax (NPAT) of $12.5 million, up 16.4%. on H1 FY21
• Pro forma earnings per share (EPS) growth of 15.4%
• Interim dividend of 6.6 cents per share, fully franked up 13.8% from H1 FY21

What else happened during the half year?

Alongside its pro forma NPAT lift of 16.4%, Baby Bunting also reported a 12.2% increase in statutory NPAT to $8.1 million. Statutory figures include items like employee equity incentive expenses and the “significant costs associated with business transformation projects”.

Digital sales also continued to grow at the company, representing 23.8% of total sales, up from 19.7% in H1 FY21.

The Baby Bunting share price may be coming under some pressure with the 1.25% reported increase in its cost of doing business (on a pro forma basis).

The company cited its investments in the new National Distribution Centre and one-off establishment costs for New Zealand, along with $500,000 of COVID-related costs, for bringing the cost of doing business to 30.2% of sales for the year.

What did management say?

Commenting on the results, Baby Bunting’s CEO Matt Spencer said:

Baby Bunting had an exceptional first half in what were, again, some challenging conditions. Through great work by the Baby Bunting team, we achieved record sales and grew gross profit, without compromising value to the consumer. This contributed to a significant growth in NPAT…

Our store performance was supported by our strengthened digital offer, including click and collect and online sales.

What’s next?

After opening news stores during the half in New South Wales, Victoria and Queensland, bringing the total number of stores to 64, Baby Bunting plans to open 2 or 3 more stores in the current half year. It eventually aims to have more than 100 stores across Australia.

The first Baby Bunting store in New Zealand is facing delays from the ongoing pandemic. That opening is now expected to occur early in the 2023 financial year.

Looking ahead, Spencer said:

Baby Bunting remains focused on executing its strategy of growing market share. We will continue to leverage our investments in our transformation program and growing our product range including exclusive relationships with suppliers and our own private label offering. We will also expand our services business and continue to strengthen our logistics and supply chain capabilities.

The company said that due to ongoing uncertainty caused by COVID-19, it could not currently give specific earnings guidance for FY22.

Baby Bunting share price snapshot

The Baby Bunting share price is down 6.1% so far in the new year. That compares to a year-to-date loss of 4.9% posted by the All Ordinaries Index (ASX: XAO).

The post Here’s why the Baby Bunting (ASX:BBN) share price has dived 5% in 2 days appeared first on The Motley Fool Australia.

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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 recommended Baby Bunting. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Westpac Banking Corp (ASX: WBC) share price has been a very strong performer on Monday morning.

At the time of writing, the banking giant’s shares are up a sizeable 3% to $23.45.

Why is the Westpac share price rising today?

The catalyst for the rise in the Westpac share price this morning is news that it has completed its off-market share buyback.

According to the release, Westpac has bought back $3.5 billion worth of its shares following strong demand from shareholders. This equates to 167.5 million shares or 4.6% of its issued capital.

The bank was able to undertake this buyback at $20.90 per share, which represents a 6% discount to the volume weighted average price over the last five trading sessions.

This buyback price comprises an $11.34 capital component and a $9.56 dividend component. All in all, this means the tax value of the buyback is $24.14 per share, which is a 6% premium to the Westpac share price at Friday’s close.

As a result of this program, Westpac’s CET1 capital ratio will reduce by 79 basis points.

Strong demand

Due to strong demand, Westpac advised that all eligible shares tendered at a 7% discount or greater were accepted in full at the buyback price. However, some shareholders tendering shares at a 6% discount were scaled back and shares offered at a 5% or less discount were not bought back.

Payments for the shares bought back will commence later this week on 18 February 2022 via direct credit.

Westpac’s CFO, Michael Rowland, commented: “We are very pleased to have completed the $3.5 billion Buy-Back, reducing the number of shares outstanding by 4.6% of issued capital. The Buy-Back improves our capital efficiency, returns franking credits and reduces our share count for the benefit of all shareholders. Westpac’s capital position remains strong after completing this BuyBack.”

The post Here’s why the Westpac (ASX:WBC) share price is storming higher today appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns Westpac Banking Corporation. 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 recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Carsales.com Ltd (ASX: CAR) share price is edging higher on the back of the company’s financial results, released this morning.

The Carsales share price is currently trading at $21.71, a gain of 0.56%.

Let’s take a look at what the company reported today.

Car Sales share price up amid half-yearly results

Highlights of Carsales’ half-year (H1 FY22) results include:

• Look-through revenue soared 30% compared on previous corresponding half (PCP) to $282 million
• Look-through EBITDA climbed 15% on PCP to $149 million
• Adjusted net profit after tax (NPAT) of $89 million, up 20% on PCP
• Adjusted earnings per share (EPS) of 31.4 cents, a 6% gain on PCP
• A fully franked dividend of 25.5 cents per share.

What else happened in the half?

The company reported it had improved its competitive position in all major markets.

According to Carsales, consumer engagement is higher than prior to the COVID-19 pandemic.

The company was impressed with its international performance in South Korea, Brazil, and the United States. All of these businesses achieved double-digit revenue growth in the first half of the financial year.

During the half, Carsales also acquired a 49% stake in Trader Interactive.

Management comment

Commenting further on the results, group CEO Cameron McIntyre said demand for cars globally has been strong due to fewer people using public transport, less international travel, and flexible working arrangements:

We have seen very strong consumer engagement across our global network of sites, with traffic up 12% versus pre-pandemic levels.

Our International growth strategy continues to deliver. We have an enviable portfolio of International assets, which are key pillars of our long-term growth agenda.

Globally, we are investing in moving more of the buying and selling journey online, and this positions us well as we look to partner with our dealer customers to deliver an improved consumer experience and significant long term growth opportunities across all our businesses.

Since completing the acquisition of Trader Interactive in September, we continue to be very impressed with the Trader management team and the operations and fundamentals of the business.

What’s next?

Carsales Australia expects dealer performance in the second half of the financial year to get better due to more volumes, higher yield, and strong growth.

The company is expecting higher revenue and EBITDA from its investments in the second half due to more profit and volumes in its tyres business.

Looking at the company’s international business, Carsales is confident of revenue growth in Korea, Brazil, and the United States in 2022.

Car sales share price recap

The Carsales share price has gained 2% in the past year but is down more than 13% year to date.

In the past month, the company’s shares have slid 8%.

For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has returned around 6% over the past year.

Carsales has a market capitalisation of around $6.1 billion based on today’s share price.

The post Zooming ahead: Carsales (ASX:CAR) reports strong results amid COVID-19 traffic growth appeared first on The Motley Fool Australia.

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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 recommended carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Crown Resorts Ltd (ASX: CWN) share price is pushing higher on Monday morning.

At the time of writing, the casino and resorts operator’s shares are up 3% to $12.76.

Why is the Crown share price rising?

Investors have been bidding the Crown share price higher this morning after it accepted an $8.9 billion takeover offer from private equity firm, Blackstone.

According to the release, Crown has entered into a scheme implementation deed which will see Blackstone acquire all of the shares in Crown by way of a scheme of arrangement at a price of $13.10 cash per share.

The release notes that the offer of $13.10 cash per share represents a premium of ~32% to the closing price of Crown shares on 18 November 2021. This was the last trading day prior to Crown receiving an acquisition proposal from Blackstone.

The Crown Board is unanimously recommending that shareholders vote in favour of the Blackstone transaction. This is in the absence of a superior proposal and subject to an independent expert concluding that it is in the best interests of Crown shareholders.

“An attractive outcome for shareholders”

Crown’s Chairman, Ziggy Switkowski, explained why the Board has accepted this offer.

He said: “The Board has fully considered the Blackstone Transaction and unanimously recommends the proposal, subject to customary conditions such as an independent expert concluding the transaction is in the best interests of Crown shareholders and there being no superior proposal. When considering any proposal, the Crown Board has consistently stated it is committed to maximising value for Crown shareholders.”

“The Crown Board and management have made good progress in addressing a number of significant challenges and issues emerging from the COVID-19 pandemic and various regulatory processes. Nevertheless, uncertainty remains and having regard to those circumstances and the underlying value of Crown we believe the Blackstone Transaction represents an attractive outcome for shareholders. The all-cash offer provides shareholders with certainty of value.”

“The cash offer under the Scheme of $13.10 cash per share values Crown’s equity at approximately $8.9 billion, 11 per cent higher than the initial offer from Blackstone almost a year ago. It is now appropriate that the Blackstone Transaction is put to our shareholders for their consideration,” he concluded.

What’s next?

A scheme meeting is expected to be held in the second quarter of calendar year 2022. If approved, the scheme would be implemented shortly thereafter.

There has yet to be any word out of rival Star Entertainment Group Ltd (ASX: SGR), which recently was interested in merging with Crown.

The post Crown (ASX:CWN) share price higher after accepting $8.9bn takeover offer appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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The Boral Limited (ASX: BLD) share price is edging lower in early trade, down 0.8%.

Boral shares closed on Friday at $3.79 per share and are currently trading at $3.76.

Below we take a look at the construction materials company’s financial results for the half year ending 31 December (1H FY22).

Boral share price edges lower on profit hit

• Sales revenue of $1.5 billion up 1% on the prior corresponding half year and up 3% on a comparable basis
• Net profit after tax (NPAT) before significant items down 12% from 1H FY21 to $145 million
• Earnings before interest and tax (EBIT) of $238 million down 10%
• Pre-tax gain of $931 million for significant items mostly from sale of its North American Building Products
• Operating cash flow of $185 million decreased 52% from the prior corresponding period

What else happened during the half year?

The big news during the half year was the company’s $3 billion return of surplus capital to its shareholders. While this caused the Boral share price to sink on the day it was announced on 4 February, shareholders look to be well rewarded.

The cash distribution is equal to $2.72 per share, comprised of $2.65 equal cap return and a special dividend of 7 cents per share (cps), unfranked. It will be completed on 14 February.

Additionally, the company reported that the strength of its sales revenue was driven by stronger underlying demand despite COVID-19 continuing to shutdown construction activities and a very wet second quarter.

The 23% fall in EBIT (excluding Property) of $78 million was largely due to the $33 million impact from those construction shutdowns, alongside rising energy costs.

Excluding the impact of the construction shutdowns, Boral noted its transformation program is delivering, with return on funds employed (excluding Property) increasing to 10.5%.

What did management say?

Commenting on the results, Boral’s CEO Zlatko Todorcevski said:

With completion of the divestment of our North American Fly Ash business on 11 February 2022, we have now finalised the strategic realignment of our portfolio to focus on our Australian construction materials business.

We have substantially reshaped our portfolio, divesting our Boral North America businesses and Australian Building Products businesses for proceeds of $4.1 billion. And post half-year, we’ve completed the return of $3 billion in surplus capital to our shareholders.

Following receipt of the proceeds from the sale of Fly Ash, Boral has at least a further $500 million in surplus capital on a proforma basis. After considering any reinvestment opportunities, Boral will determine how to apply the surplus in accordance with its Financial Framework.

What’s next?

Looking ahead, Todorcevski added:

To recover the impact of higher energy costs and other cost increases on our business, we’ve implemented out-of-cycle national price increases. These, together with further Transformation benefits and less expected disruption to construction activity, should deliver stronger earnings in the 2H FY2022.

Boral expects Transformation benefits for the full financial year in the range of $60–75 million, net of inflation. It does not forecast any more property sales in the half year ahead.

Capital expenditure in its continuing operations, inclusive of new leases, for FY22 is forecast to come in at around $300 million.

Boral share price snapshot

When looking at the Boral share price, it’s important to keep in mind the $3 billion return of capital to shareholders, announced on 4 February.

From the opening bell on 4 January through to 3 February, Boral shares gained 5.3%. Over that same period the S&P/ASX 200 Index (ASX: XJO) lost 6.7%.

The post Boral (ASX:BLD) share price edges lower as COVID hits profits appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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