Adelaide Brighton Extended Its Cement Supply Agreement With OZ Minerals Ltd

Leading construction materials and lime producing group Adelaide Brighton Limited (ASX: ABC) has extended its long-term relationship with OZ Minerals Ltd by signing a contract for the continuation of cement supply to the OZ Minerals Prominent Hill Operation.

In an announcement made on 13 May 2019, the company confirmed the extension of cement supply to its important long-term customer, OZ Minerals Limited. As per the announcement, the company also includes aggregate and sand supply for the Prominent Hill Operation, reflecting the Company’s competitive offering of a broad range of products in the South Australian market.

Adelaide Brighton is one of the largest suppliers of cement and clinker products in Australia and it is also a leading importer of cement, clinker and slag into Australia with an unmatched supply network that enables efficient access to every mainland capital city market. Adelaide Brighton’s successful long-term growth strategy includes geographic and product diversification. Further, the Company has built leadership positions in the markets in which it operates to broaden exposure to Australia’s economic growth.

In 2018, construction markets were strongest in New South Wales and Victoria. Queensland, Northern Territory and South Australia (SA) experienced stable demand during the year, while demand in Western Australia eased. Excluding Western Australia and Northern Territory, residential construction activity remained healthy during 2018 and the non-residential and infrastructure sectors continued to improve. The business continued to perform well in 2018, with full year revenue increasing by 4.6% to $1,630.6 million as compared to the previous corresponding period (pcp).

Cement and clinker sales volumes increased by 1.1% in 2018 as compared to pcp. Sales were stronger into east coast markets but declined in South Australia and Western Australia which impacted average realised cement prices. During 2018, the company also experienced increased competition in South Australia and Queensland.

In the recently held Annual general meeting, the company’s chairman told that for the majority of 2018, the company was able to capitalise on the favourable demand for construction materials and lime while delivering on expectations for the three concrete and aggregates businesses acquired in 2017. Although the company experienced delay in supply to some of its customers’ projects and adverse weather conditions, the company achieved record revenues of $1.6 billion and increased net profit after tax of $185.3 million. As a result, your company increased earnings per share to 28.5 cents.

The company has declared a final ordinary dividend of 11 cents per share and a final special dividend of 4 cents per share for FY18, bringing total dividends declared and paid for the 2018 year to 28.0 cents per share, fully franked, representing a payout ratio of 98.2%.

The Company continues to deliver against its long-term growth strategy of being cost competitive; with a focus on operational improvement; growth of the lime business and vertical integration opportunities into downstream aggregates, concrete, logistics and masonry businesses.

At market close on 13th May 2019, the stock of the company was trading at a price of $3.550, with a market capitalisation of circa $2.36 Billion.

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