Brickbats from the Market for Adbri Result




Investors took out the long handle and gave the Adbri share price a good seeing to on Monday after the Adelaide-based building products group revealed a weak set of figures for the six months to June 30 and not much joy for the next half.

The shares ended down more just on 17% at $2.21.

Despite record revenues, surging costs ate away profit margins in the half.

Adbri reported a 8% rise in revenue for the half to $812.4 million "driven primarily by strong construction and mining sector demand and improved pricing across most products”

But statutory net after tax profit fell 15% to $48.1 million and even the usual best complexion profit measure, “underlying” net after-tax profit dipped 1.3% to $54.3 million.

Adbri explained that the June, 2022 half “was impacted by operational challenges associated with extreme wet weather events on the east coast of Australia; anticipated lower lime volumes; higher raw materials, shipping, transport, power and fuel costs; partially offset by out-of-cycle price increases and profit on property, plant and equipment sales.

The company’s cost cutting could only find savings of $7.5 million in the half which “only partially offsetting inflationary pressures,” according to directors.

Adbri trimmed interim dividend to a fully franked 5 cents a share from 5.5 cents.

CEO Nick Miller said in the statement:

“We have delivered another period of top line growth, with increasing volumes across the majority of our product lines as strong demand continued in the construction and mining sectors, despite significant disruption to the business as a result of severe weather events on the east coast of Australia.

“The Company has actively managed its pricing strategy to partially mitigate significant inflationary pressures while continuing to execute our cost reduction program to deliver savings and protect earnings.”

But investors were not all that enamoured with the limited outlook for the rest of 2022 financial year from Adbri as management backed away from providing a guidance for 2022 due to the uncertain trading environment.

It did note that demand for its products is expected to stay strong in the second half. This is so much so that underlying earnings in 2HFY22 will be ahead of the same period last year.

The company said also targeting around $10 million in cost savings for the year and is looking to make more out-of-cycle price increases for its products.

But seeing it has already found $7.5 million in savings in the first half, the $2.5 million for the December half was not seen as significant and analysts suspect Adbri will struggle to offset the uncovered cost pressures for a while yet with price rises and more cost cuts.