Adbri says earnings will grow driven by strength in construction and infrastructure
Adbri managing director Nick Miller said the company delivered a robust result in trying times.
Construction materials firm Adbri has flagged that the pandemic handbrake has been loosened, with strong construction pipelines across both commercial and residential to bolster the bottom line this year.
The company’s shares reacted to bullish comments on the profit outlook from managing director Nick Miller, surging more than 10 per cent higher to $3.34
The company’s underlying net profit inched 3 per cent higher to $119.1m last calendar year, with volume growth in all products pushing revenue 8 per cent higher to $1.67bn.
The profit attributable to shareholders was up by a quarter to $116.7m.
While Adbri flagged that it is facing about $10m in cost headwinds for items such as pallets, shipping, labour and West Coast gas, it will hopefully avoid 2021’s $14.4m in pandemic-related costs. It also had non-recurring operational costs of $5.8m.
Mr Miller said the company’s vertically-integrated model, and the fact that it was a domestic manufacturer, had stood it in good stead through supply chain pressures and cost increases more broadly.
Adbri was now well-positioned to take advantage of a strong pipeline of work across commercial and residential construction, including an increase in multi-residential builds,’’ he said.
“It was a really robust financial result which we’re particularly pleased with given the challenges associated with Covid disruption throughout the year,’’ he said.
“Importantly it does reflect our geographical footprint across Australia -our balance of exposure to the mining sector coupled with infrastructure, housing and commercial construction.’’
Mr Miller said Adbri had “pretty good line of sight’’ out to the middle of the year around residential and commercial construction, with the flow-on effects of the Federal Government’s HomeBuilder program for example continuing to wash through the market.
“We expect that to be steady through the balance of 2022, and (we have) reasonable line of sight on infrastructure through to the end of 2022, and likewise with our mining sector customers, subject to the geopolitical environment of course.’’
Mr Miller said the company expected underlying earnings growth as it continued its cost-out strategy, which over-delivered last year, contributing pre-tax cost savings of $26.1m.
“Growth in underlying earnings is expected, driven by increased contributions from cement,
concrete, aggregates, masonry and joint ventures, as well as contributions from recently
acquired assets such as Milbrae, Metro and Zanows (subject to completion),’’ Mr Miller said.
“Earnings from lime will reflect reduced volumes for Alcoa, although this will be partially offset by import substitution demand from the mining sector.’’
Net proceeds from surplus land sales over the next 12 months are expected to be at least $20m, Mr Miller said.
The company’s gearing sat at 34.5 per cent at the end of the year, and with $453.7m in available liquidity, Adbri was well-funded to continue its transformation strategy, Mr Miller said.
Adbri said it achieved a 2 per cent reduction in emissions last year compared with 2020, and would be increasing the use of alternative fuels as it sought to hit net zero by 2050.
Macquarie Research said the Adbri result was solid, despite being marred by one-offs.
“Like much of the industry that has reported in February, the underlying tone in trading conditions is positive and supportive of our thesis,’’ Macquarie said.
“Operationally, a solid result that was affected by many one-off costs.’’
Macquarie has an “outperform” rating on the stock with a 12-month price target of $4.10.
Adbri will pay a fully franked 7c final dividend on April 11.
ABC Price at posting:
$3.24 Sentiment: None Disclosure: Not Held
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