Boral share price soars 12% on 'strong profit growth'

Boral's underlying profit is up 53% and adjusted earnings per share is up 50%.

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Key points

  • The ASX building and construction materials company has released its FY23 first-half earnings 
  • The Boral share price surged by as much as 12% shortly after the open on news of a 53% bump in underlying profit 
  • Shareholders will not receive an interim dividend 

The Boral Limited (ASX: BLD) share price is skybound on news of strong earnings and profit growth during the first half of FY23.

The ASX building and construction materials company released its FY23 first-half earnings this morning.

Boral shares opened at $3.75, up 6.5%, before rising to a high of $3.95 — a 12.2% bump on yesterday's close.

The Boral share price is currently up 8.4% at $3.815.

Boral share price jumps on 50% profit lift

In its ASX statement, the company said it had achieved "strong underlying revenue, earnings, and profit growth".

The highlights for the six months to 31 December 2022 are as follows:

  • Revenue $1,681.1 million, up 12% on the previous corresponding period (pcp) of 1H FY23
  • Earnings before interest and taxes (EBIT) $95.3 million, up 15%
  • EBIT margin 5.7%, up 20 basis points
  • Return on funds employed (ROFE) 8.5%, improved by 80 basis points
  • Net profit after tax (NPAT) $56.8 million, up 53%
  • Adjusted earnings per share (EPS) 5.1 cents, up 50%.

Despite the impressive numbers, Boral shareholders will not receive an interim dividend.

The company said this was due to "limited availability of franking credits and free cash flow performance for the half".

The last time Boral paid a dividend was this time last year, along with a capital return.

What else happened in 1H FY23?

While Boral reported a significant boost to its underlying NPAT, its statutory NPAT was actually down 91% at $89.5 million pcp.

That's because 1H FY22 included $1,002.4 million of income from discontinued operations in the United States, and the profit on the sale of its US building products business.

Boral said its 1H FY23 revenue bump of 12% related to volume and price.

The company said it had offset "a sharp increase in costs felt across the business" due to inflation through "price and cost discipline".

Boral said its operating cash flow is up 37% to $117.4 million.

What did management say?

Boral CEO Vik Bansal, said:

While our financial results are pleasing considering a difficult inflationary environment, I know Boral is capable of much more.

It is promising to see our pricing actions gain traction, which along with volume growth and cost discipline drove EBIT, excluding Property, 23% higher to $95.4 million…

We will need to remain highly disciplined and focussed in getting price realisation from the market across the country while maintaining a disciplined approach to cost management. Price erosion is not an option for Boral.

What's next?

Boral said it expects 2H FY23 EBIT to be broadly in line with 1H FY23.

The company said the priorities for 2H FY23 include embedding the new operating model and the continued roll-out of standardisation and simplification initiatives.

This relates to Bansal's PEMAF strategy (people, environment and sustainability, markets, assets, and finance), introduced at the annual general meeting last November.

Bansal said:

During the first half of the year, we have been quick to move towards a new, decentralised but standardised operating model, aimed at better leveraging our network, extensive downstream footprint, and vertically integrated upstream infrastructure.

Other priorities include managing inflationary pressures and focusing on price and volume of sales. The company said price realisation is more important than cost recovery.

Boral share price snapshot

The Boral share price is up 28.5% over the past six months . This compares to a 7.2% bump for the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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