There are more problems for building products manufacturer Boral as the company has been forced to cut its full year profit forecast for a second time amid poor weather and a weak construction market.
A statement by the company says it now expects full year net profit before one-off items of $100-$110 million, down from an original forecast of $150-$175 million prior to an earlier $22 million downgrade in April.
Recently appointed interim chief executive Ross Batstone has blamed the downgrade on bad weather and construction project delays, saying the company’s fourth quarter performance had been impacted by bad weather in June, delays to major resource sector and road construction projects, weaker property sales and continued weakness in residential construction.
“A number of recent events have come together to weaken Boral’s trading performance in the fourth quarter which add to the impact of ongoing weakness in the Australian new housing construction market,” Batstone says.
Batstone says Boral has tightened spending in response to the conditions, and that total group expenses for the year to June will be at the lower end of the $400-$450 million guidance range provided after the first half of the financial year.
Batstone stresses that the company is operating comfortably within banking covenants and has no need for additional funds in the short to medium term.
The downgrades come amid mounting evidence of challenging operating conditions for building products suppliers and those who service the building and construction industry.
The most recent data from the Performance of Manufacturing Index indicated that even as costs continue to rise, activity in the manufacturing of construction materials declined sharply in May after having increased in April.
In addition, recent data from ABS suggests that while cement manufacturing conditions are holding up well, conditions in the manufacturing of bricks and tiles are extremely challenging.
The demise of engineering and building technical service firm Hastie Group Limited, which provided plumbing, refrigeration and other products to the building sector, is seen as a prime example of the challenges facing firms supplying products to the industry.
Moreover, as weak building data continues to come though, there appears to be little sign of any improvement in conditions in the immediate term.