Adbri’s Earnings To Tread Water in 2021 As Alcoa Lime Contract Expires but Long-Term Remains Bright

We make no change to our AUD 3.15 per-share fair value estimate for narrow-moat Adbri following the delivery of full-year 2020 net income of AUD 114 million. The result was AUD 13 million ahead of our forecast, owing to greater top-line resilience than we’d expected amid a difficult, coronavirus-marred year for the Australian construction materials industry. Cost-out initiatives also proved more effective than we’d anticipated. While we forecast a further contraction in operating income in 2021--owing to the previously announced loss of Adbri’s largest lime customer, Alcoa--our expectation for Adbri to benefit from an imminent recovery in residential construction activity remains unchanged.