Let’s have a glance at the performance and recent updates of the big four builders on ASX; James Hardie Industries PLC, CSR Limited, Boral Limited and Adelaide Brighton Limited. The stocks yielded decent YTD returns, Adelaide being an exception.
James Hardie Industries plc (ASX: JHX)
James Hardie Industries plc (ASX: JHX) is a manufacturer of building products for the construction and remodelling of a new home, manufactured housing and has a variety of commercial and industrial applications. The company’s products portfolio includes fibre cement siding, backer board, and pipe. The company’s operations extend to several countries, including the United States, Australia, New Zealand, the Philippines, Europe and Canada.
Good and disciplined financial performance has been reflected in the operating results for the fiscal year 2019 in a significant inflationary cost environment. The revenue for the period increased by 22%, adjusted net operating profit increased by 3% and the adjusted return on capital employed remained strong at 28%.
Results At Glance FY19 (Source: Company Reports)
The Asia Pacific segment contributed strong results for the company during the fiscal year 2019. Net sales increased by 11% in Australian dollars due to strong volume growth in Australia and Philippines businesses. In addition, EBIT margin was 22.3%, driven by strong performance in the Australian business.
The North America segment achieved 3% top line growth and EBIT margin of 23.1%, which flows within the target range of 20% to 25%. The focus for the fiscal year 2020 will be to return to the primary demand growth to the targeted range and the company is confident of the outcome.
The company is expecting modest growth in the US housing market in the fiscal year 2020. The single-family new construction market and repair and remodel market is expected to grow at a slower pace in FY2020 than in 2019, and the new construction is expected to start between approximately 1.2 million and 1.3 million.
The Europe business, however, delivered a strong pro forma net sales growth of 7% in Euros for the fiscal year 2019, and an adjusted EBIT margin of 10.6%, which was in line with the expectations. The integration has progressed well since the acquisition of Fermacell and the company is encouraged by early indicators from the European business.
The stock of James Hardie Industries PLC is trading at $19.080, with a market capitalisation of $8.33 billion (AEST 04:00 PM June 21, 2019). The stock yielded a YTD return of 25.22% and exhibited returns of 27.96%, 6.69% and 4.71% over the past six months, three months and one-month period respectively. Its 52-week high price stands at $23.90, with a 52-week low price of $14.380 with an average volume of ~1.58 million. The stock is trading at a PE multiple of 25.45x with an annual dividend yield of 2.19%.
CSR Limited (ASX: CSR)
Focussed on Growth & Innovation: CSR Limited (ASX: CSR) is engaged in the business of manufacturing and supplying the building products for residential and commercial construction in Australia and New Zealand. The company maintained a stable payout ratio along with the growth in EBIT margin and Returns on Fund Employed over the past four years and expects its strong operational cash flows to support future growth.
Recently, Alan Robert Harold Sindel acquired 36,501 ordinary fully paid shares at a price of $3.3572 per share. The company is determined to pay a final dividend of 13.0 cents per share, franked at 50%. This will take the full year dividend amount to 26.0 cents per share.
Results Summary FY19 (Source: Company Reports)
The trading revenue for the period stood at $2.3 billion, a growth of 4% as compared to the prior year, followed by growth in revenues across all businesses. The company posted a net profit after tax from continuing operations of $181.7 million for the period, a decline of 14%, with decent operational performance in Property and Building Products, offset by the anticipated degrowth in Aluminium earnings subsequent to a significant rise in the electricity costs.
For building products segment, the company is bent to make changes in its overheads and operational footprint, so that the earnings impact can be reduced. The housing activity on the back of high employment, stable environment for interest rates and population growth will support longer term demand for CSR’s building products. In the property segment, the quantity of earnings may fluctuate due to the timing of transactions; however, the ongoing development of several major projects will support the property earnings over the coming years.
CSR’s strong operational cash flow will enable the company to undertake capital management and return surplus capital to its shareholders with the $100 million on-market share buyback launched in March 2019.
The stock of CSR Limited is trading at $4.020, with a market capitalisation of $1.99 billion (AEST 04:00 PM June 21, 2019). The stock yielded a YTD return of 43.68% and exhibited returns of 44.20%, 18.81% and 11.48% over the past six months, three months and one-month period respectively. Its 52-week high price stands at $4.810, with an average volume of ~3.62 million. The stock is trading at a PE multiple of 25.680x with an annual dividend yield of 6.53%.
Boral Limited (ASX: BLD)
Boral Limited (ASX: BLD) offers infrastructure and commercial building solution along with providing a wide range of products and services required for the construction with three distinct segments of Boral Australia, Boral North America and USG Boral.
1H FY19 Results Highlights (Source: Company Reports)
The company exhibited EBITDA of $485 million in 1H FY19 (down 3%), excluding the impact of divestments. Revenues from continuing operations increased by 4.6% to $2,928.8 million in the first half of FY19. The increase was primarily back of the growth in the North America segment. North America posted a healthy EBITDA growth of 9% with an EBITDA margin of 18%.
The management is of the opinion that the Headwaters acquisition has delivered substantial growth and is expected to drive return on fund employed (ROFE) improvement going forward. The company delivered a return on funds employed of 8.1%, with ROFE of Australia segment at 15.9%. USG Boral delivered a lower underlying ROFE of 8.1% due to softer earnings.
The company expects FY19 EBITDA to be higher than FY18 skewed in the second half of FY19. Boral Australia is expected to deliver EBITDA broadly in-line with FY19 (excluding property in both years). The property earnings in FY2019 is expected to be ~$30 million as compared to $63 million in the prior corresponding period of FY18. In the North America segment, the company expects the spring recovery to benefit from March, combined with a modest level of continued growth in underlying market demand across end-markets. The company expects price growth for most of its products, thus improving margins.
The stock of Boral Limited is trading at $5.350, with a market capitalisation of $6.19 billion (AEST 04:00 PM June 21, 2019). The stock yielded a YTD return of 8.87% and exhibited returns of 9.77%, 11.86% and 7.54% over the past six months, three months and one-month period respectively. Its 52-week high price stands at $7.420, with an average volume of ~6.21 million.
Adelaide Brighton Limited (ASX: ABC)
Adelaide Brighton Limited (ASX: ABC) is a producer of lime and construction material, supplies a range of products required in the building, construction, infrastructure and mineral processing across Australia.
Importantly, Adelaide Brighton Limited have been removed from the S&P/ASX 100 Index effective at the Open on June 24, 2019.
The strategy of the company is highly relevant, including cost reduction and operational improvement across the business, growth of the lime business to supply the resources sector and focused and relevant vertical integration.
The cost reduction and operational improvement across the business is comprised of best practice operational performance, import strategy to maximise asset utilisation and focus on energy usage and procurement. The growth of the lime business to supply the resources sector consists of market-leading resource and cost position, long term customer contracts and growth and continuous improvement to maintain cost leadership. Finally, the focused and relevant vertical integration is supported by the diversified operations delivering long term value, actively targeting strategic aggregates positions and a strong emphasis on the shareholder value creation.
Performance Summary (Source: Company reports)
2018 was a year of strong operational performance for the company. Revenues for the period increased 4.6% to $1,630.6 million, reflecting a benefit of acquisitions made in 2017, as well as demand across the residential, non-residential and infrastructure sectors and stable lime demand. The company reported a net profit after tax of $185.3 million and basic earnings per share of 28.5 cents, both up 1.4% on the prior year.
The company has reduced CO2 emissions by 30% since 2010, via increased efficiencies and low emission fuels while increasing sales volumes.
The stock of Adelaide Brighton Limited is trading at $4.190, with a market capitalisation of $2.75 billion (AEST 4 PM June 21, 2019). The stock yielded a negative YTD return of 0.41% and exhibited returns of -0.76%, -4.54% and 12.53% over the past six months, three months and one-month period respectively. Its 52-week high price stands at $6.963 and 52-week low price stands at $3.430, with an average volume of ~2.16 million.
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