Adbri (ASX:ABC) share price slips on half year results

The ASX construction and materials company released its half year financial results today.

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The Adbri Ltd (ASX: ABC) share price is falling in intraday trade, down 4% to $3.50 per share.

This follows on the release of the ASX construction materials company’s financial results for the half year through to 30 June (1H21).

Adbri share price slips on half year results

  • Underlying net profit after tax (NPAT) of $55 million, an increase of 15.5% on 1H20
  • Revenue increased 7.4% from the prior corresponding period (pcp) to $752.3 million
  • Underlying earnings before interest, taxes and depreciation (EBITDA) margins improved from 17.5% to 17.7%
  • Declared an interim dividend of 5.5 cents per share (cps), fully franked, up from 4.75 cps in 1H20

What happened during the reporting period for Adbri?

The company credited its revenue lift on improved conditions during the half year, particularly in Queensland and New South Wales. It said “robust demand” for construction materials saw increased volumes across all its products.

Adbri secured 3-year contracts to supply lime to ASX mining giant Northern Star Resources Ltd (ASX: NST) and US-listed Newmont Corporation (NYSE: NEM). The company also reached an agreement with Alcoa Corp (NYSE: AA) to supply lime to their Wagerup facility until the end of September, with the potential to continue supply through the end of January 2022.

Adbri reported its Mawsons joint venture (JV) has agreed to acquire the Milbrae concrete, aggregates and crushing business. This will add 7 concrete plants and 13 quarries in regional New South Wales, subject to completion.

It reported that the sale process for its Hilltop land site in Geelong, Victoria has commenced. The company expects this to be complete in late 2021 or early 2022.

A long-term gas deal with Senex was also secured (post reporting period), which Adbri said will lock in an “important portion” of its gas requirements in South Australia until 2029.

Joining a growing list of companies addressing climate change, Adbri announced its goal of net zero carbon emissions by 2050.

What did management say?

Commenting on the results, Adbri’s CEO Nick Miller said:

Adbri delivered a robust first half financial performance for 2021 recording solid growth in revenue and profits with improving margins as demand for construction materials rebounded, supported by increased residential housing activity and infrastructure spending.

We have made strong progress in executing on our strategic priorities and investment initiatives, while continuing to maintain a disciplined focus on managing our cost base.

What’s next for Adbri?

Looking ahead, the company expects surplus land sales, including the Geelong Hilltop land, to deliver $20­–$30 million over the next 2 years. It also expects to see roughly $100 million in cost savings over the next 5 years, in part driven by low-cost energy contracts.

The second half of 2021 will see an increase in capital expenditure, with more investment in Adbri’s Kwinana and Accolade projects. It forecast full year capex of approximately $200 million.

Miller said that, “earnings in the second half will be impacted by a reduction in lime volumes to Alcoa, the anticipated commencement of a competing cement import terminal in NSW and COVID-19 impacts”.

These include rolling restriction on construction activity and the increased cost due to the delayed return of the Accolade from its drydock in Singapore.

Milled added that Adbri remains “well positioned to benefit from increasing construction activity as a result of ongoing government stimulus”.

The Adbri share price is up 48% over the past 12 months.

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