Are these the top material sector stocks of this year – FBU, BLD, IPL, ORA and BKW

Last year, Australia witnessed a sharp decline in the residential market, which resulted in lower volumes and heightened competitive intensity in construction and material businesses. This year, many investors are keeping a close eye on the performances of material stocks trading on ASX. Let’s take a look at five popular material stock that trades on ASX.

Fletcher Building Limited (ASX:FBU)

Building products manufacturer, Fletcher Building Limited (ASX: FBU) was able to return itself back to profitability in FY19. The company earned a Net Profit After Tax of $164 million in FY19, compared to a loss of $190 million in FY18.

FY19(Period ending 30 June 2019) Major Highlights:

• Revenue from continuing operations of $8,308 million, up 1% on FY18
• Final dividend of 15 cents per share declared, to be paid on 19 September 2019
• EBIT before significant items $631 million, up from $50 million in FY18
• Balance sheet materially strengthened, NZ$300 million share buyback programme

At the beginning of FY19, the company identified three stages to the repositioning of Fletcher Building; firstly, to stabilise the business through FY19, then to drive performance through FY20, and from FY21 onwards drive growth. The company believes that it is well-positioned to drive performance through FY20.

On 24 September 2019, the company announced the appointment of highly experienced Peter Crowley as a non-executive director of the company. From 1 October onwards, Fletcher Building Limited and Fletcher Building Industries Limited Board will comprise of the following non-executive directors:

(Source: Company Reports)

As at 24 September 2019 (AEST 3:00PM), FBU’s stock was trading at a price of $4.745, 0.317% intraday, with a market capitalisation of circa $4.02 billion.

Boral Limited (ASX:BLD)

Australia’s leading construction material and building supplier, Boral Limited (ASX: BLD) delivered a solid result in FY2019, underpinned by the benefits from cost reductions and improvement initiatives. In FY2019, Boral delivered an underlying profit after tax of $440 million, which was 7% lower than the last year. In FY19, Boral was able to deliver solid earnings despite of soft market conditions.

Earnings Per share Graph (Cents) (Source: Company Reports)

FY19 (Period ending 30 June 2019) Operational Highlights:

• Divested Denver Construction Materials for US$127 million, in July 2018
• Divested the Texas-based Block business for US$156 million, in November 2018
• Delivered US$32 million of Headwaters acquisition synergies in year two versus a target of US$25 million
• Progressed construction of its $130 million clinker grinding and storage facility at the Port of Geelong in Victoria,
• Completed quarry upgrades at Deer Park (Victoria), Orange Grove (Western Australia) and Ormeau (Queensland
• Advanced its strategy to move out of brick manufacturing globally with the sale of Midland Brick to a Western Australian consortium for $86 million.

In FY20, Boral is expecting its net profit after tax (NPAT) before significant items to be around 5–15% lower in FY2020 relative to FY2019.

As at 24 September 2019 (AEST 3:00 PM), BLD’s stock was trading at a price of $4.940, up 0.611% intraday, with a market capitalisation of circa $5.76 billion.

Incitec Pivot Limited (ASX:IPL)

Incitec Pivot Limited (ASX: IPL) recently revised its Earning guidance for FY19. Earlier, the company is expecting its FY19 EBIT to be in between $370 million to $415 million, however, after applying the publicly available actual pricing and foreign exchange rates, the EBIT range was reduced to $321 million to $366 million. Further, the operational factors have lowered the guidance to around $285 million - $295 million.

In the last 12 months, the company has made strong progress towards its strategic Agenda.

• Successfully recontracted Australian volumes
• Sustained market share growth in Dyno Nobel Americas
• Manufacturing Excellence strategy implementation underway
• Robust technology pipeline progressing well
• Premium technology continues to penetrate target markets
• Resolved uncertainty over Gibson Island gas supply
• Rationalised Single Super Phosphates (SSP) manufacturing footprint

On the stock performance front, in the last six months, IPL’s stock has provided a return of 6.12% as on 20 September 2019. As at 24 September 2019 (AEST 3:00 PM), IPL’s stock was trading at a price of $3.410 with a market capitalisation of $5.56 billion.

Orora Limited (ASX:ORA)

Packaging solutions provider, Orora Limited (ASX: ORA) was able to deliver positive performance in FY19, despite challenging economic and market conditions, particularly in North America. In Orora Australasia, EBIT increased by 6.2% to $246.6 million in FY19, with sales revenue increasing by 2.1% to $2,150 million. Earnings were driven by the record production volumes at the Botany Recycled Paper Mill (Botany Mill) and sales growth in targeted market segments. During the year, Orora’s sales revenue increased by 12.1% to $4,761.5 million, as compared to the prior year.

FY19 (Period Ending 30 June 2019) Operational and Financial Highlights

• Underlying earnings per share up 3.7% on pcp
• Solid earnings growth delivered in Australasia
• Earnings have been successfully converted into operating cash
• Acquired Texas based Bronco Packaging and Pollock Packaging
• Strong balance sheet maintained which provides future growth optionality
• Declared dividends up 4.0%, above indicated payout range

In order to offset the flat market conditions and cost headwinds in FY20, Orora will continue to invest in efficiency, growth and innovation, as well as integrate recent acquisitions.

On the stock performance front, ORA’s stock has decreased by 3.40% as on 23 September 2019. As at 24 September 2019 (AEST 3:00 PM), ORA’s stock was trading at $2.870 with a market capitalisation of circa $3.43 billion.

Brickworks Limited (ASX:BKW)

Australia’s leading building products company, Brickworks Limited (ASX: BKW) earned a record underlying NPAT from continuing operations of $234 million in FY19, driven the significant increase in Property earnings and the initial contribution from the company’s newly acquired brick making operations in North America.

FY19 (period ending 30 June 2019) Financial Highlights:

• Building Products Australia EBIT down 27% to $57 million
• Building Products North America EBIT $6 million
• Property EBIT up 68% to $158 million
• Investments EBIT down 16% to $104 million
• Final dividend of 38 cents fully franked, up 2 cents or 5.6%
• Total full year dividend of 57 cents fully franked, up 3 cents or 5.6%

BKW Outlook:

• Whilst orders and sales are currently steady in most divisions, the company is expecting the first half of FY2020 to be soft, however, it expects the market to strengthen in the second half, based on the current level of home builder sales;
• The company is expecting that its transition to the wholesale gas market on 1 January 2020 will reduce costs and will provide some relief from rising energy cost;
• In Property business, the company believes that the developments at Oakdale South will drive growth in rent and asset value over the next few years;
• The company is also looking forward to commission the Southern Cross Cement facility in the coming month, which will provide a reliable, cost-effective source of cement for its Austral Masonry and Bristile Roofing businesses in Brisbane;
• The company’s acquisition of Sioux City Brick is expected to provide significant cost synergies;
• The company believes WHSP will continue to deliver a stable and growing stream of earnings and dividends over the long term.

As at 24 September 2019 (AEST 3:00 PM), BKW’s stock was trading at $18.200 with a market capitalisation of circa $2.74 billion.

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