The share price of Adelaide Brighton Ltd. (ASX: ABC) has come crashing down like a cinder block from its record high even as the cement and lime products producer posted record revenues and declared a special dividend.
The stock tumbled 5.9% to $6.57 during lunch time trade, making it the second worst performer on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) after Harvey Norman Holdings Limited (ASX: HVN).
Adelaide Brighton reported an 11.7% increase in revenue to $1.56 billion but a 2.2% drop in net profit to $182.2 million for the 12 months ended December 31.
However, if you excluded one-off items and acquisition and restructuring expenses, underlying net profit is up 5.4% to $197.7 million.
That's still lower than sales growth and indicates increasing margin pressure during the year. Management blames higher energy prices, the acquisition of businesses with lower margins, higher site remediation costs and a cement quality issue that it had to fix for the margin squeeze.
Some of these factors are likely to persist in 2018 and that will constrain margin recovery going forward.
To offset some of these negatives, management has increased its final dividend by 0.5 cents to 12 cents a share and declared a special dividend of 4 cents a share.
The special dividend wouldn't be much of a surprise. The company has been paying a special dividend for the last four consecutive years and has paid the same 4-cent special dividend in 2017.
But the crash in the share price should be taken in context to its recent performance. The stock had hit an all-time high of $6.99 yesterday on anticipation of a good result and has outperformed the broader market by a country mile.
Even with this afternoon's sharp sell-off, Adelaide Brighton is still up by over 22% in the past 12 months when the top 200 stock index is up by around 5.5%.
Other building materials companies have also gained about the same amount thanks to their upbeat outlook with Boral Limited (ASX: BLD) and James Hardie Industries plc (ASX: JHX) chalking up gains of 33% and 17% over the same period, respectively.
Furthermore, Adelaide Brighton is well placed to benefit from the ongoing infrastructure building boom in Australia that has driven a 9% increase in clinker and cement sales into Victoria, New South Wales and South Australia.
Cement demand is stabilising in Western Australia but it fell in the Northern Territory.
"We anticipate growing demand will underpin a positive 2018 for Adelaide Brighton. We will continue to pursue operational improvements and invest in the business, with capital expenditure expected to be between $100 million and $110 million next year," said Adelaide Brighton's chief executive Martin Brydon.
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