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Boral seals $86 million deal ahead of its profit results

Building materials group Boral Limited (ASX: BLD) unveiled an $86 million asset sale ahead of its half year results on Monday.

But the news isn’t helping the Boral share price as it dipped 0.2% to $4.97 in morning trade even as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index jumped 0.4%.

The BLD share price is also underperforming its peers. The CSR Limited (ASX: CSR) share price is gaining 0.8% to $4.03, the James Hardie Industries plc (ASX: JHX) share price is jumping 0.3% to $23.05 and the Adelaide Brighton Ltd. (ASX: ABC) share price is climbing 0.6% to $3.14 at the time of writing.

Shifting focus to infrastructure

Boral’s sales of Midland Brick will increase the group’s exposure to the US market. The deal to sell the bricks business to a Western Australia consortium means Boral will no longer have a local brick making operation.

“Our focus in Australia has been to continue to invest in our leading integrated construction materials business, where we supply materials to residential, commercial and infrastructure building and construction markets across all states and territories,” said Boral’s chief executive Mike Kane.

“Having divested our 40 per cent stake in the CSR Boral Bricks joint venture in 2016, the sale of Midland Brick completes our exit from bricks in Australia, for combined proceeds of around $215 million over the past three years.”

Boral has owned Midland Brick for nearly 30 years and the WA consortium taking over the business (including around 800 hectares of associated landholdings) consists of Linc Property, Birchmead (a part of the CFC Group) and Fini Group.

It’s the US market, stupid

The divestment is a sideshow and Boral’s share price retreat is more likely due to unease about its upcoming results announcement.

There are questions about the growth prospects of its US operations, which had been impacted by bad weather and patchy construction activity.

The latest results from BlueScope Steel Limited (ASX: BSL) which painted an uncertain outlook for the US construction market may have hurt sentiment towards Boral, although James Hardie did produce a relatively bullish update.

Boral will need to show that its US business following its $3.5 billion takeover of Headwaters in late 2016 is performing strongly or the stock is likely to take a big beating.

Shareholders only have one weekend to go to find this out.

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Motley Fool contributor Brendon Lau owns shares of BlueScope Steel Limited, Boral Limited, and James Hardie Industries plc. Connect with him on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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