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Adelaide Brighton revenues up, profits down in 1H13

World Cement,

Adelaide Brighton Cement, Australia, has reported increased revenues and declining profits in 1H13. Revenue from continuing operations rose 4.5% y/y to AU$579.3 million thanks to increased demand from major construction projects and the resources sector. Continued weakness in the non-residential and residential building sectors resulted in slackening demand for concrete, aggregates and concrete masonry products, particularly in the eastern states and overall net profit after tax fell 8.8% y/y to AU$60.9 million. Operating cash flow improved 14.8% y/y to AU$89.3 million. Though debt rose during the period, net finance costs declined in line with lower market interest rates and a gain on foreign currency hedges.

Cement and clinker sales

Sales volumes increased slightly against 1H12 thanks to demand from resources and mining projects in Western Australia and North Territory as well as infrastructure projects in South Australia. Average selling prices increased, but margins declined due to higher input costs – particularly in terms of energy prices and the impact of the carbon tax.

Production volumes were similar to 1H12, with increased production in Western Australia (Munster plant) making up for the slight fall off in production in South Australia (Birkenhead and Angaston plants). Import profitability remained more or less in line with 1H12, as did maintenance costs.

Lime, concrete, aggregates and concrete masonry products

Lime sales were up 5% thanks to strong demand from the resources sector. Production increased in line with demand, and better utilisation rates resulted in an improvement in margins y/y.

Reduced demand from the residential and non-residential sectors impacted concrete sales, though improved prices and operational efficiency improved margins. Aggregates volumes increased, and are set to further improve in the Sydney market following the exhaustion of supplies at competitor quarries.

The concrete masonry products sector suffered from the difficult trading environment, with sales revenue down 1.6% y/y despite price increases. Business rightsizing has continued to match business requirements to market conditions, resulting in the mothballing of excess capacity and the redundancy of more than 40 staff.

Adelaide Bright Joint Ventures

Earnings from the joint venture companies declined in 1H13. Independent Cement and Lime reported a decline in contribution to net profit from AU$7.1 million to AU$6.9 million amid softening demand in Victoria. Sunstate Cement Limited (Sunstate) also struggled with competitive pressures in southeast Queensland, and reported a AU$1.7 million drop in earnings. Mawsons concrete and aggregates joint venture also experienced declining demand following the completion of several major projects.

Strategic developments

Adelaide Brighton is focussing on operational improvement, growth in the lime business and vertical integration into downstream markets as part of its long-term growth strategy. The company continues to evaluate bolt-on acquisitions, and has recently completed capital spending of AU$112 million on upgrade projects.

Part 1 of 2. To read more about the results, click here.

Adapted from press release by Katherine Guenioui

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