Boral’s disappointing result

Building and construction materials manufacturer and supplier, Boral Limited (ASX:BLD) has reported a disappointing result for the 2013 financial year.

Hampered by extremely weak conditions in the local construction market, Boral has reported a $212 million loss, compared to a $177 million profit in the prior year. Excluding significant items, underlying profit came in at $103 million, in line with the company’s guidance and 3% higher than 2012.

The Construction Materials & Cement division saw a 16% in earnings before interest and tax (EBIT), to $281 million, but revenues in the second half were flat on the previous corresponding period, suggesting this business is unlikely to match the jump in EBIT in 2014.

The Building Products division produced a loss of $40 million, blowing out from a $5 million loss last year, as the company sold fewer bricks and tiles, and at lower margins. The Timber sub-division saw EBIT drop an alarming 19%, while Boral’s US business saw a 23% improvement in EBIT, but still reported a loss of $64 million, as revenues rose 11%.

Boral expects to see similar activity in the construction market in Australia in 2014 as it saw this year, but expects Boral USA to break through to profitability in the second half as the housing recovery in the US continues.

Foolish takeaway

For Australia’s building materials companies including Boral, Brickworks Limited (ASX:BKW), Fletcher Building (ASX:FBU) and Adelaide Brighton (ASX:ABC), 2014 doesn’t appear to herald a return to positive growth in the building and construction sectors. Companies may need to focus on driving down their costs to improve their profitability over the next couple of years.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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