ABC was hammered -22% yesterday following a profit downgrade and the departure of its CEO, the latter might eventually become a good thing when we consider the stock’s performance over the last year. They blamed wet weather and additional cost inflation (particularly energy & diesel) for the ~20% reduction in earnings guidance, with the 2H recovery they had previously flagged proving elusive. The key point here is around prices, and their inability to raise them to offset cost pressures and protect margins, with concrete a major issue. It seems very likely that this is an industry wide issue rather than a company-specific one, and while ABC is a smaller player on the east coast, the pressures they are feeling are likely to be across the board to varying degrees, hence the weakness right across the sector yesterday.
The building products company is now forecasting net profit after tax (NPAT) of $75-85m compared to the consensus of $116m for FY22 (December year-end), in other words, the stock fell in line with the downgrade.
- We are cautious ABC even at today’s depressed prices preferring James Hardie (JHX) in the sector given it has more US exposure
MM is neutral ABC
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