Construction materials producer Adelaide Brighton says housing construction on Australia’s east coast is likely to soften this year.
But the company is optimistic about maintaining profits.
Strong building activity on the east coast boosted Adelaide Brighton’s 2015 full year earnings, with the group lifting net profit by 20.4 per cent to a record $207.8 million and declaring a special dividend.
Chief executive Martin Brydon said new housing was beginning to slow in NSW and Victoria.
“That’s naturally a cycle, irrespective of bubbles and everything else,” Mr Brydon told AAP.
“Clearly, the residential sector can’t continue at the rate it is on the east coast. That’s likely to soften over the next year or two.”
But he said an infrastructure wave was approaching and the industry had limited capacity to service both sectors.
“It’s probably neat timing,” he said.
New home markets in NSW and Victoria would be subdued in 2016, while south-east Queensland was improving, he said.
South Australia had now hit the bottom and infrastructure projects would provide demand growth this year.
Meanwhile, Western Australia and Northern Territory markets would be weaker this year.
“In aggregate terms we think we’ll see some small improvement in volumes this year over last year,” Mr Brydon said.
He added that unexpected price shocks did not change underlying demand for housing construction over time.
Mr Brydon said Adelaide Brighton had increased its exposure to concrete and aggregates in 2015 which had helped drive profitability.
“NSW was going gangbusters and south-east Queensland has been improving strongly too, so we’ve leveraged on the back of that,” he said.
The pricing environment had improved and the company was optimistic about gaining further favourable price movement in the year ahead.
Adelaide Brighton shareholders will receive a fully franked special dividend of 4.0 cents on top of a final dividend of 11 cents, up 1.5 cents from 2014.
Shares in the company were three cents, or 0.62 per cent, lower at $4.79..
RECORD PROFIT FOR ADELAIDE BRIGHTON
* Full year profit up 20.4 per cent to $207.8m
* Revenue up 5.6 per cent to $1.41b
* Final dividend of 11 cents, up from 9.5 cents. Special dividend of four cents.