What: After six months of acquisitions, Adelaide Brighton Ltd. (ASX: ABC) enters the rest of the year with an improved competitive position despite a generally flat outlook.
Highlights:
- Revenue up 3.9% to $602 million
- NPAT attributable to members down 15.9% to $51.2m
- Underlying NPAT (with significant items removed) down 2.9% to $61.2m
- Cement and clinker sales down 1.9%
- Lower AUD increases cost of imports and puts pressure on margins
- Interim dividend maintained at 7.5 cents per share; full year dividend forecast to remain at 16.5 cents per share
- Significant one-off expenses of $18 million expected for the full-year
- Cost savings from restructuring estimated at $8 million for FY2014
- Repeal of carbon tax to save $5 million after tax annualised
So What?
A largely flat year for Adelaide Brighton saw improvements in some areas of the business and declines in others, leading to overall results slightly down on the first half last year.
Several reasonably priced acquisitions in South Australia and North Queensland underpin the company's production capacity for decades into the future, and a continued focus on cost reduction should see earnings improve over time.
Management reminded investors that its three focus points for the company remain:
1) Cost reduction and productivity improvement
2) Growing the lime business to support the resources sector
3) Focussed and relevant vertical integration of the business – aggregates, concrete, logistics, and masonry
In times of subdued economic activity number 1 may appear to be the most important, but points 2 and 3 are where a company can really position itself to boom once demand picks up.
Now What?
Despite a flat forecast for 2014 and the looming spectre of increased gas prices for 2015, Adelaide Brighton enjoys significant competitive advantages as a result of its scale and remains a solid long-term investment.
The concrete and cement businesses have a very long future in Australia (see above link for more info) and demand is only going to increase as our population and urban footprint grows.
Here at The Motley Fool we love to own businesses like Adelaide Brighton with deeply ingrained competitive advantages, because these advantages translate very well into profitability.
Adelaide Brighton has delivered ASX-beating performance over the past 10 years, and while it appears poised to do so again, it's far from the only company with market-beating potential.
That's why our top analyst has recently released a free report on his top stock pick for 2014/2015 – while it's small, it has great long-term earnings potential and flies under the radar of most investors.
It's a company I already own, and one I think you would be interested in too.
If you're interested, simply click on the link below and enter your email address – it takes less than 30 seconds – and we'll send it to you, completely FREE!
