February 14, 2017 / 10:58 PM / 2 years ago

Australia's Boral posts revenue drop, but asset sales boost profit

SYDNEY, Feb 15 (Reuters) - Boral Ltd, Australia’s largest supplier of building materials, said on Wednesday that half-year revenues fell in its key Australian and U.S. markets.

But due to cost savings and asset sales, the company posted a 12.3 percent rise in net profit for the six months to Dec 31, and the company said it was well positioned to benefit from a strong Australian housing market and a recovery in the United States.

Boral reported net profit of A$153.4 million ($117.4 million) for the half-year, compared to A$136.6 million the prior year, beating a Morgan Stanley forecast for A$141 million.

The result was underpinned by the sale of Boral’s stake in brickmaking joint ventures in the United States and Australia, with the company booking A$47.9 million in profit from the divestments.

Boral produces building products such as bricks, plasterboard, trimming and roofing, and the company’s performance is a key barometer for the housing market.

In Australia, where Boral generates nearly four-fifths of its revenue, sales dropped 4 percent as strong housing starts on the east coast were offset by a decline in the west and the completion of the major office tower projects in Sydney.

In the United States, expenses associated with setting up a new brick joint venture offset modest rises in other product categories.

The company forecast earnings growth in both markets.

In light of a better-than-expected second quarter, the company also said it expected earnings to be more evenly balanced throughout fiscal 2017 rather than its previous forecast of a stronger second half.

Boral in November agreed to buy U.S. rival Headwaters Inc for $1.8 billion in cash. The combined entity would become the largest U.S. supplier of fly ash, a key ingredient in concrete at a time when President Donald Trump plans a huge jump in infrastructure spending.

“We remain confident that completion of the Headwaters acquisition, which has now received Headwaters Inc shareholder approval, will take place by around mid-2017,” Boral Chief Executive Officer Mike Kane said in a statement.

Boral hiked its interim dividend to 12 Australian cents, from 11 cents a year ago.

$1 = 1.3063 Australian dollars Reporting by Tom Westbrook; Editing by Cynthia Osterman

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