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UPDATE 2-Boral calls end to Australia's building boom, shares slide

Published 04/02/2019, 03:21 pm
© Reuters.  UPDATE 2-Boral calls end to Australia's building boom, shares slide
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* Project delays, bad weather hit demand for building materials

* Half-year net profit seen down 15 pct, EBITDA down 3 pct

* Shares drop to five-year low (Recasts on outlook; Adds shares, analyst and management quotes)

By Tom Westbrook

SYDNEY, Feb 4 (Reuters) - Australia's largest building materials supplier, Boral Ltd BLD.AX , cut its domestic outlook and said delays at big projects would dent half-year profits, sending shares tumbling as investors called time on the nation's building boom.

The company, which sells asphalt and cement as well as house-construction supplies, said it no longer expected earnings growth in Australia this year and that inclement weather there and in South Korea and the United States had hit sales.

Boral's warning follows profit downgrades at rival supplier James Hardie Industries, JHX.AX , builders LendLease Group LLC.AX and AV Jennings Ltd AVJ.AX and a collapse in building approvals, as wobbles hit one of the economy's stronger sectors.

Boral shares dropped 8 percent to a five-year low on Monday, while the broader market .AXJO rose 0.3 percent.

"It's not just Boral, it's the whole sector we've seen de-rated...they've all communicated a bit of a slowdown," said Lonsec Research equity strategist Danial Moradi.

"This could be one of a few downgrades... there's still potential danger to that guidance if conditions don't improve in the second-half."

Australia's construction sector has enjoyed a years-long boom driven by apartment building rushes in the frothy property markets of Sydney, Melbourne and Brisbane and large freeway and railway projects along the continent's east coast.

Australia is Boral's largest market and double-digit gains in revenue for concrete and asphalt helped the company to post a record profit in the 2018 financial year that ended in June. seems to be unravelling now as infrastructure projects stall and real estate values post their steepest drops in a generation. Fears of an oversupply pushed building approvals to a five-year low in December, figures released on Monday show. do expect, over the next couple of years, a continued moderation in housing and as that happens it'll slowly back off the Australian business," Boral's chief executive Mike Kane said on a conference call with investors and journalists.

"We're not looking for any pronounced, significant drop in housing as a trend long-term," he added.

Boral said in a statement that earnings for 2019 in Australia, excluding from its property division, would be similar to 2018, when it had said last August that it expected high single-digit gains "or more".

Construction delays, and rain, had also slowed demand for roadbuilding materials in Australia while a typhoon and a downturn in Korea, plus rain in the United States hurt demand for building materials there, the statement said.

It expects net profit after tax for the six months to December 31 to be about A$200 million ($145 million), compared to A$237 million for the same period a year earlier which was also what Morgan Stanley (NYSE:MS) analysts had been expecting for the half-year.

Earnings before interest, tax, depreciation and amortisation (EBITDA), excluding significant items, would fall about 3 percent to about A$485 million, Boral said. Boral reports half-year results on Feb 25. ($1 = 1.3829 Australian dollars)

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