Boral swings to $1.14b loss on US woes, scraps its dividend

New Boral boss Zlatko Todorcevski has moved swiftly to make his mark on the business he has led for just eight weeks, declaring nothing "off the table" as the company conducts a detailed review of operations at home and abroad.

He said the building products maker had let investors down with its performance as it reported a $1.14 billion net loss for 2019-20 and scrapped its dividend. The loss was driven by a $1.32 billion non-cash impairment, mainly relating to its US operations. It capped off a year where Boral discovered serious accounting irregularities in its US windows business, which sparked two class actions and pressure from investors over its performance.

New Boral CEO Zlatko Todorcevski took the reins on July 1.Credit:Peter Braig

"In recent times we have let our shareholders down and in the process we've let our own people down. I'm determined to rectify that," Mr Todorcevski said.

"The portfolio review we're undertaking is looking at all of our businesses in every geography. For each business we're analysing the market outlook, our competitive positioning and the potential to deliver improved earnings and growth both in the near term and into the future," he said. "To be clear we're looking at the entire company, not just certain regions or certain segments. Nothing is off the table."

The ASX-listed $4.7 billion company reported an underlying profit before significant items of $181 million, down a hefty 57 per cent. All divisions reported lower EBITDA (earnings before interest, tax, depreciation and amortisation), with overall EBITDA down 30 per cent to $710 million.

The large net loss was expected, after Boral flagged substantial details of its results early this week including the $1.3 billion plus impairment.

The company said it had been hit by substantially lower earnings margins in the second half due to lower sales and production volumes.

"These are obviously sobering figures," Mr Todorcevski said, adding that Boral had experienced a tough second half in Australia and the US.

Boral's Australian business was hurt by both bushfires and floods in the second half, which increased costs and cut volumes. This was followed by the emergence of COVID-19, which cut production, increased costs and substantially reduced earnings across all divisions.

Mr Todorcevski said that while Boral had some excellent assets in parts of the company, they had not always delivered to their potential.

"Our expansion into North America through the Headwaters acquisition has under-performed. Having looked at that acquisition in closer detail my view is that we paid a value that left little room for error, which was unfortunate considering execution was found wanting.

"There is no doubt that the acquisition has failed to meet the expectations of our shareholders and our own expectations. It's contributed to the large and disappointing impairment we reported earlier this week," he said.

Boral shares were up 1 per cent at $3.88 shortly after 12.30pm on the Australian market.

The dividend decision is in line with the company's dividend policy of paying out 50 per cent to 70 per cent of earnings before significant items, subject to financial circumstances. Total revenue was down 2 per cent to $5.73 billion, in line with market consensus.

The company did not make any profit forecasts for the current financial year.

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