Boral Ltd (ASX: BLD) is an international building products and construction materials company. Boral has three main divisions: (1) the materials business of Boral Australia (USG Boral); (2) the plasterboard joint venture in Asia, Australia and the middle East; and (3) Boral North America products and fly ash business. Boral has a market capitalisation of A$4.3 billion.

What did Boral announce today?

Boral announced today (15 June 2020) that Zlatko Todorcevski has been appointed as Chief Executive Officer (CEO) & Managing Director of Boral, effective 1 July 2020. Boral’s current CEO Mike Kane will retire from Boral in September 2020.

Boral notes that Mr Todorcevski has 30 years of experience in Australia and internationally in steel building products, oil and gas, and logistics, working in finance, business planning and strategy roles, including as Chief Financial Officer of Brambles Limited from 2012 to 2016 and Oil Search from 2009 to 2012. This followed a 23-year career at BHP in senior finance and business development roles across BHP’s steel building products and petroleum businesses, culminating in the role of CFO Energy at BHP based in the USA.

Mr Todorcevski is also on the Board of Coles Group Limited, where he serves as Chairman of the Audit and Risk Committee, and The Star Entertainment Group Ltd, where he is Chair of the Audit Committee.  He will complete an orderly transition off those Boards over the coming months.

Why has Boral announced a new CEO?

Boral’s operational performance over the last 2 years has been negative. Over the last two years, Boral’s share price has fallen 45%, there has been five profit downgrades and on 5 December 2019, Boral announced financial irregularities in Boral’s North American Window business involving misreporting including in relation to inventory levels, raw materials and labour costs. The investigation found that pre-tax earnings were overstated by a total of US$24.4 million between March 2018 and October 2019.

What is the outlook for Boral?

The earnings outlook for Boral is uncertain. Private investment as shown from the national accounts in the March 2020 quarter has fallen sharply. The main hope is that the increase in public investment may increase demand for Boral’s services over the short-term, which should balance out the loss in private investment.

Regarding Boral’s management, investors can hope that the new appointment of Mr Todorcevski to CEO can clean up the company’s performance, particularly in Boral North America.

What is the market reaction?  

The market reaction to Boral’s announcement is positive. Boral’s share price has increased by around 6% today and is currently trading at A$3.69. This is a positive reaction as the Australian market is down around 0.15%. Boral has a forward P/E ratio in the low-teens and has an annual dividend yield of around 5.2%.

 


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June 15, 2020