Boral share price falls as reality sets in

Boral (ticker: BLD) – which represents Australia’s largest construction materials and building products supply company – saw its share price fall sharply on Tuesday after releasing its FY21 results to the market.

The company has attracted significant attention from the market and media of late, after Kerry Stokes’ Seven Group swallowed up 70% of Boral in recent months.

Corporate skirmishes aside, Boral reported a solid set of FY21 results, though the absence of a final dividend likely left investors wanting.

FY21 results

On the top-line, the company saw full-year revenue slump 6%, while sales revenue from continuing operations came in at $2.9 billion. This, said management was driven by ‘lower volumes and softer prices.’ By comparison, revenue from total operations was $5.3 billion 2021.

On the bottom-line, Boral posted earnings (EBIT) of $445 million, up 45% year-on-year; and profits (NPAT), before significant items, of $251 million, implying a year-on-year increase of 44%.

Giving a more granular view to that EBIT performance, Boral noted that its Australian division – on a continuing operations basis – booked EBIT on an ex-property basis, on $157 million, up 11% year-on-year. Looking forward, as part of its 5-year transformation program, the company is targeting Australian EBIT of between $200 million to $250 million.

The company has also drastically lowered its debt over the last 12-months, with net debt falling from $2.5 billion in 2020 to $899 million at the close of FY21.

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Dividends?

One thing from the results that may have shocked the market however was the lack of a dividend. Here Boral’s Board noted that it would not pay a Final Dividend. Analysts from Ord Minnett described this as a key negative, saying:

‘The lack of a dividend could be a disappointment; we were forecasting 4cps and consensus was at 6cps.’

Despite the lack of a dividend, the company teased future dividends following the completition of its US divestments, which was noted, would result in surplus capital.

‘Subject to prevailing conditions and other reinvestment opportunities, surplus capital will be available for distribution to shareholders taking into account the availability of franking credits and the prevailing share price.’

FY22 outlook

While the company did not provide specific FY22 operational performance guidance, management stressed that that the 'underlying market conditions in Australia are mixed and uncertainty remains.'

This has already impacted fiscal 2022 operations, with the company saying it has experienced 'lost volumes and higher costs' as a result of the Greater Sydney outbreak/ lockdown. Tangibly, management said this could result in a hit of upto $50 million to Q1 EBIT.

Boral share price

In response to all this, Boral’s share price was bid sharply lower on Tuesday, falling 5.18% to $6.50 per share by the afternoon session. Positively at least, at those price levels the stock remains up 30% year-to-date.

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