Adelaide Brighton Ltd (ASX: ABC) shares have opened 7% lower this morning after the company withdrew guidance due to coronavirus uncertainty.
The construction materials producer has withdrawn its earnings guidance for the full year ending 31 December 2020 as it is unable to predict the impact of coronavirus on its operations.
Construction industry under threat
Adelaide Brighton is the latest in a conga line of ASX shares to withdraw guidance in the face of the coronavirus threat. Adelaide Brighton supplies products to the building, construction, and infrastructure markets throughout Australia.
There have been growing concerns around a nationwide shutdown of the construction industry. The industry has thus far endured by implementing social distancing measures, staggered shift and break times, and site-wide decontamination.
Adelaide Brighton CEO Nick Miller said, "to date, all of our sites have been fully operational, and since our full year results release in late February, our business has continued to trade largely in line with our expectations. However we are unable to predict the future impact of COVID-19 on our operations and earnings and consider it prudent to withdraw our FY20 guidance."
The company claims its balance sheet remains robust, and it is well-positioned with $450 million of cash and committed and undrawn banking facilities. Adelaide Brighton completed a refinancing of its major debt facilities in November last year and has no debt facilities maturing until November 2024.
Building products impacted
Building products company Boral Limited (ASX: BLD) withdrew its earnings guidance in March, with CEO Mike Kane saying, "we expect market conditions will worsen as a result of temporary lockdowns and restrictions to contain the spread of the virus." The company reported it was starting to see signs of impacts in its markets and was taking steps to respond to demand interruptions.
Boral is working to conserve cash by reducing all non-essential capital expenditure and discretionary spending. Nonetheless, ratings agency S&P downgraded the building products company's outlook to negative at the end of March. S&P says coronavirus restrictions are likely to significantly depress Boral's earnings and hinder cash flow across all core divisions.
According to S&P, declines in sales, production volumes, and earnings will be particularly severe in the fourth quarter of the financial year ending 30 June 2020. Residential building approvals climbed in February (the latest month for which data is available) but are expected to fall steeply in coming months.
Coronavirus is also likely to hit builders' supply chains, causing project delays. The fall in business and consumer confidence will make it harder for builders to secure financing and insurance.
The construction industry is notoriously precarious, accounting for one-fifth of all companies entering administration. The companies that supply materials to the industry are also likely to come under pressure in the coming months.
