By Simon Evans
The industrial conglomerate controlled by the billionaire Stokes family will deliver its shareholders a bumper payout after a significant rise in profits at its newly privatised building materials business, Boral.
SGH acquired Boral in July, adding it to a portfolio of businesses, which includes Caterpillar retailer WesTrac, industrial hire company Coates Hire and stakes in gas producer Beach Energy and Seven West Media.
The concrete and asphalt products group, which was publicly listed for six decades, reported earnings had increased 29 per cent to $259 million in the six months to December 31, the first period in SGH’s ownership. The buyout was finalised on July 4, days into the financial year.
SGH chief executive Ryan Stokes said Boral’s margins had improved significantly over the past year as the company, one of the country’s largest suppliers to construction projects, kept cost increases to a minimum but pushed through price rises including 3 per cent on concrete.
“The unlock of that margin has come quickly. We’re not expecting that to cap out this financial year,” he said, adding that margins should keep improving in the next financial year helped by an increase in the number of houses and apartments under construction around the country.
Boral, which ash been run by former Cleanaway chief executive Vik Bansal since 2022, has been growing quickly for several years. Under Mr Bansal and Mr Stokes, the company has transformed itself from a sclerotic and sprawling building material empire into a simpler business that has handed more responsibility to individual sites to increase profitability.
“He’s delivered that performance jump much quicker than anticipated. Vik has done an outstanding job,” Mr Stokes said.
That success pushed SGH’s earnings before interest and tax up 10 per cent to $843 million for the six months ending December 31. Revenues across the conglomerate, more than 50 per cent owned by the Stokes family, rose 2.2 per cent to $5.5 billion. The company told investors it would pay an interim dividend of 30¢ per share, up from 23¢ for the same period one year earlier.
SGH shares have risen about 45 per cent since it acquired Boral, and rose 6 per cent on Tuesday to close at $51.65. That gives the company a market capitalisation of $21 billion, dwarfing the $269 million valuation of Seven West, the media empire with which the Stokes family is most associated.
Barrenjoey analyst Brook Campbell-Crawford said SGH’s earnings growth, a 10 per cent increase to $843 million over the six months, was more than double the market’s expectation of five per cent.
Wilson Asset Management analyst Sam Koch said Boral had been a very successful acquisition for SGH. “Since their initial investment, profit margins have nearly tripled. Vik Bansal has successfully turned this business around, driving a culture of strict pricing discipline and cost control, that has resulted in a steep change in earnings,” Mr Koch said.
WesTrac, the business that supplies Caterpillar trucks and excavators to the mining industry, lifted earnings by 5 per cent to $352 million in the six months to December 31. Earnings at the Coates hire division fell 2 per cent, which the company largely attributed to weak demand in Victoria. Coates is now relocating some of its equipment to other states, particularly NSW and Queensland, where demand has been stronger.
“Clearly we’ll be moving gear to where there is demand,” Mr Stokes said.
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