Cost Pressures Mean No Div for AdBri Holders




Adelaide-based building products group Adbri Limited has dropped its final dividend as the company struggles with cost pressures, especially in the upgrade of its operations at Kwinana, south of Perth.

"In October 2022, Adbri paid a fully franked interim dividend of 5 cents per share. Considering the capital required for the completion of Kwinana Upgrade project, the Board has decided not to declare a final dividend. The Board continually reviews the Company’s capacity to return funds to shareholders., the company told the market on Tuesday.”

AdBri paid a final of 7 cents per share a year ago.

"The review of the Kwinana Upgrade project is largely complete, and whilst there are capital cost pressures likely to push the final budget above our most recent cost estimate of $290 million, the project review work confirmed its robust economics due to strong operational cost savings.

"The final component of the review will help determine an updated capital cost estimate, and a schedule for achieving commissioning and commencement of operations.

"Once the Kwinana Upgrade is commissioned and operational in 2024, the benefits from ceasing cement operations at Munster and operating solely at Kwinana are estimated to deliver greater operating cost savings than originally projected.

"Construction continues, with the remaining packages of work still to be awarded being predominately on-site construction related. These are expected to be higher costs than originally budgeted and will be awarded in coming weeks.”

AdBri said revenue rose 8.4% to $1.7 billion for the year (better than inflation) "driven by price increases and volume growth across most product lines.”

Statutory net after tax profit fell to $102.6 million, down from $116.7 million in 2021, "driven by higher operating costs as a result of inflation, particularly energy costs, and wet weather events.”

Underlying net after tax profit eased 0.9% to $118.0 million (FY21: $119.1 million) but after excluding profits from property sales, underlying net after tax profit was $77.7 million, down from 2021’s $113.0 million and in line with the guidance range provided in the October 2022 downgrade.

Net debt jumped to $576.4 million at December 31, up from 2021’s $437.4 million "reflecting the Zanows acquisition and Kwinana Upgrade project, partially offset by surplus land sales.”

That was after bank debt facilities increased by $50 million to $940 million.

CEO Mark Irwin said in comments on the result:

"Despite some significant operational headwinds during the year, the company made solid progress on a number of strategic initiatives, including our Kwinana Upgrade project, growth of our concrete and aggregates footprint through the Zanows acquisition, further recovery in our lime business, increased exposure to the infrastructure sector and divestment of some surplus land holdings.

"Although we anticipate cost headwinds to persist in 2023, we expect the demand environment to remain buoyant across the resources and construction sectors and that the benefits of price increases should rebuild resilience and margin in response to the challenging external operating environment.

AdBri shares fell more than 7% to $1.71.