Building materials group Boral has given strong guidance for half-year profit of $ 90 million because of good construction conditions from favourable weather and a rebound in building products sales.
But analysts are questioning what the trading update means for second half earnings.
Most analysts had expected Boral, Australia’s biggest building products and construction materials group, to report first-half profit of about $ 75 million when it reports earnings on February 12.
But despite the strong profit number, Boral’s statement that it expects a “significant skew of earnings to the first half of the year” compared with the second half will create uncertainty among analysts.
“It’s better than we anticipated for the first-half but the release isn’t clear about what that means for the second half,” CIMB analyst Andrew Scott said.
“Some major projects are rolling off and there’s been some bringing-forward of work with the weather. The market will quickly adjust for the first half but then look forward to the second half.”
Boral said the skew would occur because of the timing of major projects and a “reduced contribution” from Boral Gypsum as its share in the venture drops to 50 per cent when the half-stake sale to USG is completed.
Large projects including Boral’s work on the mammoth Curtis Island LNG projects in Queensland are tapering off quickly in the good weather, leading to a pull forward of some earnings.
Boral’s $ US 1.6 billion joint venture deal with USG was inked last year but the sell-down of Boral’s gpysum business is now expected to be completed on February 28 rather than the initial timeline of January 31 due to regulatory delays.
The deal saw Boral sell half of its gypsum business in Australia and Asia to USG for $ US500-plus million ($ 570 million), shoring up the balance sheet, while integrating USG’s plasterboard technology into Boral’s gypsum platform.
The reduced profit of around $ 15 million following the partial sale of the gypsum business, lower profits from property sales and reduced contributions from major projects will all contribute to lower earnings in the second half.
Boral shares where up 1 per ent to $ 4.77 on Tuesday morning.