Boral [ASX:BLD] posts a strong path to recovery on new CEO’s tough cost and pricing plan.

Earlier today, building and construction materials manufacturer Boral [ASX:BLD] revealed a higher half-year profit, which had surged on strong volumes and pricing across its asphalt, cement, and quarry products.

Its latest results suggest recovery for the building group and caused a push in share price by more than 8% earlier this morning.

BLD shares are worth $3.81 at time of writing, having gone up 32% in the new calendar year so far.

Boral may have taken a sure stride in trade and sales this last half, but there will be no dividend payouts as of yet.

The BLD share price is still trading 8.5% lower than the wider S&P 200, even with its 27.5% gain over the last month:

www.TradingView.com

New initiatives deliver growth for Boral

Today, Boral proudly displayed an overall uptick in performance for its building materials business, claiming strong underlying revenue and EBIT growth, the returns from strategies put into place by its new CEO.

Boral reported the following highlights for the six months ending 31 December 2022:

• Revenue for the half totalled $1.68 billion, up 12% on the prior corresponding period (pcp).
• EBIT (earnings before interest and tax) came to $95.3 million, up 15% on pcp.
• EBIT margin was 5.7%, up 20 bps on pcp.
• ROFE (return of funds employed) reached 8.5%, which improved by 80 bps pcp.
• NPAT (net profit after tax) of $56.8 million went up 53% pcp.
• Adjusted EPS (earnings per share) came to 5.1 cents per share, an increase of 50% pcp.

On a statutory basis, NPAT was $89.5 million for the first half, a decline of 91% the same time in FY22 when it was boosted by one-off sale profits of its North American Building products business.

Boral claimed that the use of price and cost decline strategies helped offset sharp increase in costs.

The group’s operating cash flow saw a 37% increase to the total of $117.4 million.

No dividends in tough cost crack down

The company found there to be limited availability of franked credits, and free cash flow performance didn’t quite hit the mark required for an interim dividend payment.

Boral’s new Chief Executive, Vik Bansal, remains focused on a flatter management structure style and disciplined cost strategies put in place since joining October last year.

Mr Bansal commented:

‘While our financial results are pleasing considering a difficult inflationary environment, I know Boral is capable of much more. We are reporting underlying NPATof $56.8 million, up 53% and adjusted EPS1,2 of 5.1 cents per share, which is a 50% improvement.

‘It is promising to see our pricing actions gain traction, which along with volume growth and cost discipline drove EBIT, excluding Property, 23% higher to $95.4 million in comparison to the prior period. This resulted in a 50-basis point EBIT, excluding Property, margin expansion to 5.7%.’

Bansal maintained his perspective that high discipline and focus will assist in achieving price realisation in the market and keep cost management in check.

Boral anticipates second half EBIT to mirror the standard set by the first half, while the company continues rolling out standardisation and simplification initiates and pricing focus on its continued road to recovery.

Regards,

Mahlia Stewart

For The Daily Reckoning

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