COMPANIES in the housing and construction market, already hit by cyclical downturns in Australian and US housing markets and the negative effects of the US subprime mortgage crisis, experienced mixed results.
Building materials group, Boral recorded strong levels of infrastructure and non-dwelling activity in Australia, underpinned by strong levels of concrete demand and a record result for the company’s domestic construction materials group, but said its US operations weren’t performing as well.
Boral derives around 20-30% of its income outside Australia and the company announced it expects full-year profit to fall to about $225m. Rod Pearse, MD of Boral, said while there is considerable uncertainty, he anticipates that US housing starts could fall to 1.1m in fiscal 2008, which is 30% below the prior year.
“If this occurs and if the Australian/US dollar exchange rate remains at around US90¢ for the remainder of the year, Boral’s profit after tax in the first-half and the full-year will be around 15% below last year,” he said.
If conditions worsen and interest rates continue to rise, it could compound the already poor conditions in the NSW housing market, where Boral derives around 40% of its Australia revenue.
“Our focus is to manage the business well during the downturns and to position the company to deliver maximum value for shareholders during the upturns.
“This includes ensuring that we take costs out of the business and maintain prices when volumes are under pressure and that we invest in cost effective capacity to supply the market upturns which are typically very strong after significant and prolonged downturns,” Pearse said.