Gypsum industry news
Boral says coal seam gas vital to recovery
24 March 2014Australia: Boral chief executive Mike Kane said that coal seam gas is critical to the future of Australian manufacturing as he warned that rising energy costs are threatening to kill the industry. The US executive has only been running Australia's Boral for about 18 months, but he has already slashed 1000 jobs and cut US$95.5m from the company's cost base.
Kane still has costs firmly in focus, saying that spiralling energy costs are seriously damaging manufacturers. "Coal seam gas is part of the future recovery for Australian manufacturing," he said. "If it is not exploited properly, I think Australian manufacturing has a use-by date attached to it because the inflationary pressures in energy will kill domestic manufacturing over time."
Gas and electricity costs Boral about US$91.1m/yr. The group's newly-signed contracts in New South Wales and Victoria will see Boral's cost of gas rise about 20% from 2014. Because of import parity pricing, it is difficult for Boral and its competitors to pass cost increases on to customers. However, Kane is testing the waters. At its half-year result in February 2014, when Boral reported a 73% jump in underlying half-year profit to US$82.4m, the company flagged its intent to raise concrete prices by 6% in April 2014.
Over the past decade the strong Australian Dollar, high wages, rising energy costs and static productivity have taken their toll on manufacturers. "The Australian economy is showing signs of recovery but it is still early days. Not all of the states are reaching the same rate so I would argue that Queensland, Victoria and South Australia still have a while to come," Kane said.
USG and Boral granted clearance to form a joint venture
21 February 2014US/Australia: The Commission of New Zealand has granted clearance to USG Corporation and Boral Limited to enter into a joint venture.
The proposed joint venture relates to the two parties' operations in Asia, India, the Middle East and Australasia for the supply of plasterboard, ceiling tiles and ancillary building products such as metal studs and tracks, metal ceiling grids and metal ceiling battens.
The Commission found no significant overlap between USG and Boral in the plasterboard and ceiling tile markets and therefore focused its investigation on the supply of metal building products because the proposed joint venture would give USG Corporation an interest in Rondo Building Services Pty Ltd. At present, both USG and Rondo supply a range of metal building products in New Zealand.
The Commission was satisfied that the proposed joint venture will not have, or would not be likely to have, the effect of substantially lessening competition in separate markets for the supply of metal studs and tracks, metal ceiling battens and metal ceiling grid.
"In all three of these markets, the proposed joint venture would face competition from a number of different suppliers including both domestic manufacturers and importers," said Commerce Commission chairman Mark Berry.
Boral reports 73% jump in half year profit
12 February 2014Australia: Boral has reported that its half year underlying net profit jumped by 73% on the back of improved housing and road construction markets, cost cutting measures and dry weather conditions. The company saw its underlying net profit rise to US$81.5m in the six months to 31 December 2013. However, the company also warned of a slowdown in activity and earnings in the second half of the financial year, which runs until 30 June 2014.
Boral actually recorded a net loss of US$23.6m for the half year but this figure includes US$106m in one-off accounting charges related to its gypsum plasterboard joint venture, due to be completed on 28 February 2014, which it says will be offset by gains in the second half.
Chief executive Mike Kane highlighted a US$20.8m turnaround in the Australian building products division and a 6% lift in its largest division, building materials and cement.
"The rise was driven by strong project activity, very dry weather conditions in New South Wales and Queensland and the benefit of restructuring and overhead cost reduction initiatives," said Kane. "Despite expected underlying performance improvements, there will be a skew of earnings to the first half compared to the second half due to higher major project volumes, dry weather conditions in the first half and the impact of the gypsum joint venture."
The company achieved US$54.7m in cost savings, much of which came from cutting 1000 jobs. Boral plans to use much of a US$453m payment from its gypsum partner USG to reduce its US$1.26bn net debt.
Australia/US: USG Corporation has announced that it and Boral Limited continue to progress toward completion of their 50/50 strategic joint venture. While completion was originally anticipated to occur by 31 January 2014, it is now expected to occur on or before 28 February 2014, due to additional time being necessary to obtain regulatory approvals.
Boral provides first half of financial 2014 trading update
28 January 2014Australia: Boral has announced that it expects net profit after tax (NPAT) before significant items for the first half of financial 2014 to be US$90m, subject to finalisation of an audit review.
The result is underpinned by favourable weather conditions in Australia, strong volumes from major projects, a significant turnaround in the performance of the Building Products division and benefits from prior year restructuring activities. For 2014, the company expects a significant skew of earnings to the first half of the year compared to the second half of the year, due to lower contributions from major projects and reduced contributions from Boral Gypsum. The latter is expected following the move from a 100% owned division to a 50% joint venture, upon completion of the transaction with USG during the second half of 2014.
Boral and USG to form US$1.6bn joint venture
17 October 2013US/Australia: Boral and USG Corporation have entered into agreements to form a US$1.6bn joint venture producing wallboard in 12 countries across Asia, Australasia and the Middle East. Boral will contribute its Gypsum division to the joint venture, which includes its plasterboard operations in Australia and Asia. USG will contribute its Asian and Middle Eastern businesses, as well as exclusive access to its ceilings, cement board, fibre board, lightweight plasterboard and joint compound building products technologies in the joint venture's territory.
"The transaction is a major step forward for Boral and our vision is to create a world-leading interior linings business in Asia, Australasia and the Middle East," said Boral's CEO & Managing Director, Mike Kane.
The joint venture will be owned 50% by Boral and 50% by USG. In order to achieve an interest of 50% in the joint venture, USG will pay Boral up to US$575m in tranches. It will have a wallboard production capacity of 633Mm2/yr. The joint venture is expected to be completed by January 2014.
Management of the joint venture will be shared between Boral and USG with Frederic de Rougemont from Boral Gypsum who is appointed as CEO and Paul Monzella from USG Corporation who is appointed as CFO. USG will appoint the Chairman, Jennifer Scanlon, with the right to appoint chairman alternating between USG and Boral every two years.
Boral Gypsum Asia profit falls in 2012 – 2013
22 August 2013Australia: Boral's Asian profit for its gypsum division has fallen by 10% for its 2012 – 2013 financial year, which ended on 30 June 2013.
The Australian building materials manufacturer calculated that, in the first full year following its acquisition of all of Boral Gypsum Asia, its earnings before interest and tax (EBIT) fell to US$51.2m from US$56.6m on a like-for-like basis. It blamed the decline on challenging conditions in South Korea and China, lower demand in Vietnam, plant ramp-off costs and the effects of lower capacity utilisation rates. However, on the same basis revenue for the subsidiary rose by 4% to US$502m in the period.
Boral's Australian gypsum division, Plasterboard Australia, saw its revenue fall by 5% to US$301m from US$316m. EBIT remained flat at US$22.5m.
"Boral Gypsum delivered softer underlying earnings in FY2013 due to cyclical challenges in some Asian markets and the cost impacts of investment ramp-ups in China and Indonesia. The business remains extremely well positioned for future earnings growth in Asia and Australia and has invested in three additional board lines that will increase net capacity in Asia by 16%," said Boral's chief executive officer and managing director, Mike Kane. For its gypsum businesses, Boral reported that capacity expansion projects at Chongqing, China (15Mm2/yr) and Ho Chi Minh City ,Vietnam (30Mm2/yr) have been delayed for completion in the second half of 2013 and early 2014 respectively.
Overall, Boral made a loss of US$192m for its 2012 – 2013 financial year. In the previous year it made a profit of US$160m. Its sales revenue rose by 5% to US$4.71bn from US$4.26bn in the prior year. Its profit after tax but before significant items rose by 3.2% to US$94.3m from US$91.4m. EBIT before significant items rose by 14% to US$206m from US$180m.
In the 2013 – 2014 financial year the division's performance is expected to remain strong, despite lower property sales and reduced major project work. However, overall the results in 2013 – 2014 are not expected to exceed those in 2012 – 2013.
Boral cuts another 100 jobs in Australia
02 May 2013Australia: Building materials group Boral has cut 100 jobs from its Australian business, taking total job losses from its global operations to 1100 since January 2013. A company spokesperson confirmed the job cuts to the Australian Financial Review ahead of a presentation by chief executive Mike Kane in Sydney.
Kane's presentation revealed Boral's strategy, including ambitious growth targets for the Asian gypsum and US businesses. Its gypsum business holds a 40-45% market share in Asia with a wallboard production capacity of 625Mm2/yr.
Boral records US$26m loss in first half of 2012-2013
13 February 2013Australia: Building materials supplier Boral has reported a loss of US$25.1m for the first half of its 2012-2013 fiscal year, due to a sustained weakness in the Australian and US housing markets. It recorded a profit of US$157m in the same period in 2011-2012.
For the half-year ending on 31 December 2012, Boral reported a sales revenue of US$2.86bn, 14% above the previous year. Earnings before interest and tax (EBIT) (before significant items) increased by 3% to US$116m. Both figures benefitted from acquisitions that the company made. Profits were hit by US$79.6m impairment charges tied to the suspension of cement production at Waurn Ponds, Victoria and first half restructuring and redundancy costs.
"In Australia, Construction Materials delivered a solid 25% improvement in EBIT, but Building Products reported a very disappointing US$18.6m first half loss, following an US$11.4m loss in the second half of last year," said Boral's CEO and Managing Director Bob Kane.
He added that in the newly combined Boral Gypsum division, Australian Plasterboard was also significantly impacted by lower volumes and higher operational costs, reporting a 45% decline in EBIT. This decline was offset by a US$19.6m increase in reported earnings from Asia as a result of the acquisition of the remaining 50% interest of Boral Gypsum Asia in the 2012 financial year.
Boral cuts 1000 jobs
17 January 2013Australia: Boral, Australia's largest building materials supplier, has said that it will cut 1000 jobs from its global operations this fiscal year as part of a restructuring initiative intended to improve competitiveness. It is hoped that the changes will save US$95m/yr, with estimated savings of US$39m in 2013.
CEO and managing director Mike Kane described the company as 'burdened' with excessive overhead costs. "While this may be less obvious during the good times, it becomes critically exposed when times are tough," he said. The restructuring follows a 100 day review of the business conducted by Kane.
The majority of job losses are in Australia, where 885 positions will be axed. This includes the 90 roles Boral said that it would cut in December 2012 as it announced plans to suspend the production of clinker at its Waurn Ponds cement plant in eastern Australia. 15 jobs will be cut in the US.
In June 2012 the company reported that it had 14,740 employees, with around 8730 in Australia. A further reduction of 1420 employees will also take place due to Boral's previously announced divestment of assets in Asia and Australia.