Adbri Cements Solid Result




Adelaide based cement maker, Adbri doubled its full-year profit to $93.7 million but slashed dividends as it plans a heavy spending year ahead, allied with continued cost cutting and hopes of continuing to ride the building boom, especially in WA.

It was a better than expected result from AdBri (formerly Adelaide Brighton) as its cost cutting and business improvement program and the stronger demand in the Western Australian market – delivered.

The final payout was raised to a fully-franked 7.25 cents a share, up from 5 cents a year ago. That took the full year payment to 12 cents a share, up from 5 cents a share for 2019.

The company reported revenue of $1.45 billion for the 12-month period - a fall of 4.1% on 2019 - as lower residential activity hurt cement and concrete volumes, offsetting improved sales of lime and concrete products.

However, it noted that an underlying profit of $115.6 million was ahead of the full-year guidance of $110.7 million that was initially withdrawn last April 2020.

Adbri said this was because it had prudently responded to pressures from slowing markets, rising input costs and challenges posed by COVID-19.

“In the context of the challenging operating environment, the financial outcomes we delivered for FY20 are better than we had expected,” chief executive Nick Miller said in a release this morning.

Adbri also said that it wants to play a key role in building “a better Australia” thanks to a construction materials sector that is expected to benefit from various government stimuli, particularly to fast-track ‘shovel ready’ construction projects including infrastructure spending.”

Looking to the coming year the company did not give numerical guidance but indicated it is going to be a year when the company will be battered on all sides.

“…trading conditions are expected to remain challenging until the stimulus measures completely offset underlying softness in east coast construction markets,” directors said.

“We are making strong progress in evaluating strategic initiatives to unlock opportunities for our lime business.

“However, as previously announced, earnings will be impacted when the Alcoa contract concludes on 30 June 2021, and by the anticipated start-up of a competing cement terminal in New South Wales with an expected after-tax impact of $16 million for 2021.

“Earnings will be supported by increasing demand for cement and lime from a growing number of mining projects as the resources sector continues to operate largely uninterrupted.

“The Group will continue its cost reduction and operational improvement program, targeting $20 million in cost savings to counter cost headwinds of $10 million in 2021.

Capital expenditure is anticipated to be around $200 million, including approximately $75 million for the Kwinana Upgrade Project and approximately $40 million in development capital. Surplus land sales are expected to generate $20 - 30 million in proceeds over the next two years.

“At this stage, we do not intend to provide more specific guidance, due to the ongoing uncertainty associated with COVID-19 and the timing of major infrastructure projects,” directors said.

Despite those comments AdBri shares rose more than 10% to $3.26.