Materials sector Stocks reflecting movements on ASX ledger: ABC, ORA, BKW, CSR

Summary

• As per its latest update, ABC expects no material impact on revenue up until June next year (the time when lime supply contract is due to expire). ABC’s subsidiary Cockburn Cement was intimated by Alcoa that it had opted to not to renew the contract.
• Last month, ORA notified the market on returning $600 million to stakeholders in the form of capital return ($150 million) and a special dividend ($450 million) because of various considerations like coronavirus associated uncertainty, tightening liquidity in debt markets, etc.
• Last week, BKW notified on obtaining a lease pre-commitment for twenty years with Amazon at the JV Trust’s Oakdale West Estate (Western Sydney). The project is expected to provide profit in its development stage and rental income for the Property Trust post completion.

The materials sector of Australia include those entities, who are in the business of construction materials, paper, forest products and associated packaging goods, and metals, minerals and mining entities, which comprises of steel producing companies. During the span of last three years, S&P/ASX 200 Materials Index has provided an annualised return of 11.44%.

In this article, we will look at four materials sector stocks with recent updates:

Adbri Limited

Non-Renewal of Contract:

Adbri Limited (ASX:ABC) is engaged into manufacturing and distribution of cement, and cementitious products, lime, premixed concrete, aggregates, sand, and concrete products.

On 20^th May 2020, the Company changed its name to “Adbri Limited” from “Adelaide Brighton Limited”.

On 3 July, ABC announced that the lime supply contract between its subsidiary entity, Cockburn Cement Limited and Alcoa of Australia Limited will not be renewed, which is likely to expire on 30^th June 2021. The contract account for around $70 million in annual revenue for the Group. However, its non-renewal is not anticipated to materially affect revenue until after June 2021. ABC would speedily assess and take required mitigating measures.

Do Read: Why these ASX-listed companies are on downswing ?

In April this year, the Company retracted its earnings guidance for FY20, considering the uncertainty with regards to the duration and influence of the coronavirus pandemic. The Group mentioned that it had a strong balance sheet and was well positioned with more than $450 million of cash and committed and undrawn bank facilities.

On 7th July 2020, the stock of ABC was trading at $2.145 per share, with a fall of 2.055% (at AEST 12:30 PM). ABC has generated returns of -34.63% and 6.83% during the last one and three months, respectively.

Orora Limited

Orora Limited (ASX:ORA) provides numerous tailored packaging and visual communications solutions to its clients.

Recently, ORA notified the market that it was planning to return $600 million to stakeholders in the form of capital return of $150 million and a special dividend of $450 million.

The Company added that the return was considered appropriate and had been determined after considering various factors including: COVID-19 associated uncertainty, tightening liquidity in debt markets, as well as terms of its debt facilities, maintaining Orora’s solid balance sheet.

In another update in April, ORA announced the conclusion of sale of its Australasian Fibre Business, which was a milestone for Orora. The conclusion of transaction symbolises compelling value for stakeholders and improves ORA’s solid balance sheet to provide value creation via growth investment.

Currently, the Company has a more simplified group of businesses, which includes the Australasian Beverage business and its North American businesses. The Beverage business of ORA happens to be a leading supplier of cans, glass and wine closures in Australia and New Zealand regions, while the North American businesses, includes of Packaging Solutions and Orora Visual that are well positioned.

On 7^th July 2020, the stock of ORA was trading at $2.51 per share, declining by 1.569% (at AEST 1:02 PM. ORA has generated returns of -9.73% and -1.46% during the last one and three months, respectively.

Brickworks Limited

Brickworks Limited (ASX:BKW) is mainly engaged in the manufacturing of a diverse range of building products across Australia and North America.

On 30 June, BKW declared that it has secured a lease pre-commitment at the JV Trust’s Oakdale West Estate with Amazon for 2 decades. This state-of-the-art distribution facility would be a landmark development for the JV Trust, which is a 50:50 joint venture between BKW and Goodman Group (ASX:GMG).

Trading Update

As per BKW’s trading update on 15 June this year coronavirus pandemic affected every business segment to a varying degree.

• During the four months ended May 2020, trading activities of the Company were robust in Building Products Australia and reported a fall of 10% in sales revenue on pcp.
• In the United States (Building Products North America) overall sales revenue went up by 26% in the 4-month until May against the same period last year. This growth was supported by the acquisitions completed by the Company over the past 12 months.

During 1H FY20 closed 31 January 2020, the Company reported underlying net profit after tax from continuing operations amounting to $100 million, reflecting a fall of 37% from the prior corresponding period. The statutory NPAT for the period stood at $58 million with a fall of 49%, after including discontinued operations and the impact of significant items.

The Company made significant progress on several key strategic initiatives during 1H FY20 despite the decline in earnings against the record underlying profit achieved in the prior period. BKW’s expansion into the United States has provided the Group with further diversification, as well as possibilities for development across the long term.

On 7^th July 2020, the stock of BKW was trading at $15.75 per share, with a fall of 0.568% (at AEST 1:39 PM). BKW has generated returns of 20% and -15.61% during the last three and six months, respectively.

CSR Limited

CSR Limited (ASX:CSR) is engaged in the manufacturing and supply of building products in Australia and New Zealand.

In May this year, the Company updated the market with operational and financial performance for the year ended March 2020 (FY20) and outlined the following:

• CSR reported a net profit after tax amounting to $125.3 million, reflecting a rise from $78.0 million in the previous year, which included impairment charges from the Viridian Glass business (sold on 31 January last year).
• NPAT from continuing operations (before significant items) stood at $134.8 million, which declined from $181.7 million noted in the previous year.
• CSR noted Building Products revenue amounting to$1.6 billion, with a decline of 6%, indicating continued weakness in residential building activity, which was down 21% on average.
• The Company closed FY20 with strong balance sheet and net cash of $95 million. CSR also obtained a further $200 million in facilities, in the month of May 2020 to help reinforce liquidity position.

Do Read: Leading Indicators for Building Products companies?

On 7^th July 2020, the stock of CSR stood at $3.68 per share, with a fall of 0.271%. CSR has generated returns of 13.54% and -19.78% during the last three and six months, respectively.