Boral’s New Leader Plots Pathway Toward Economic Profit Generation; Shares Fairly Valued

New CEO Zlatko Todorcevksi made his vision of a markedly more profitable Boral more apparent to investors at Boral’s fiscal 2021 half-year result. Incremental detail was provided in regard of his evolving strategy to reinvigorate the beleaguered construction materials player. His strategy aims to deliver a marked improvement in through-the-cycle returns on invested capital, or ROICs, via the combination of a permanent reduction in the cost base of Boral’s existing businesses and the targeting of new earnings streams. Cost-out initiatives will focus on better coordination of raw materials procurement across the Boral group and a cost-reducing supply chain optimization program. New earnings streams are to be targeted via product innovation and from opportunities identified in adjacent building material product categories. Taken together, Boral aims to deliver an AUD 300 million uplift to group EBIT, net of inflation, via its cost-reduction programs and new earnings stream opportunities, with the express objective of driving prospective economic profit generation at all points of cycle. We are cautiously optimistic about the potential for the sustained improvement in Boral’s returns.