(Corrects historical share move in headline, first paragraph.)
Boral Ltd. (BLD) surged the most in almost four years as the Australian building materials company said it would cut 1,000 jobs, or 7 percent of its workforce, to reduce costs amid a slowdown in the construction industry.
Boral jumped 10.3 percent to A$4.81 at 2:09 p.m. in Sydney, on course for the biggest increase since March 2009. The benchmark S&P/ASX 200 (AS51) index gained 0.4 percent.
“The market is rewarding Boral today for streamlining the business,” Ben Le Brun, market analyst at OptionsXpress in Sydney, said in an e-mail. “It is hoped that 2012 will prove to be the bottom of the cycle for the current downturn in construction.”
Boral will cut about 700 jobs including managerial positions in Australia to save about A$90 million ($95 million) annually, the Sydney-based company said in a statement to the Australian stock exchange. The remaining reductions will come from outsourcing some posts in Australia and the U.S. and previously announced closures, it said.
Central bank efforts to stimulate Australia’s construction industry by cutting the benchmark interest rate to match a half- century low of 3 percent are having limited impact. The number of construction jobs fell by 21,900 in the 12 months through November, government figures show, while the sector has been shrinking for the past 31 months.
The company “has become burdened with excessive overhead costs,” Chief Executive Officer Mike Kane said in the statement. The restructure “will transform the group into an organization that is more responsive to the realities of a cyclical marketplace and one that remains competitive not just during the cycle highs but when conditions are challenging, as they have been for the past few years.”
Boral reported net income of A$177 million in the 12 months ended June 30, compared with A$168 million a year earlier. The group’s cement and construction materials divisions were hit by “very weak” building activity and disruption from rainfall on the nation’s east coast, to which the company responded by closing some operations and selling others.
“Boral’s business model was built on a reasonably healthy housing construction industry, with some tolerance to cyclical moves, but not to the extent of the downturn in construction we have seen,” Peter Esho, chief market analyst at City Index. Ltd. in Sydney, said in an e-mail. “The big share price gains are perhaps overdone and this isn’t a sector of the market we’re getting too excited about.”
Boral shares surged 21 percent in 2012, and about 10 percent this year. That compares with a 15 percent gain in the benchmark last year and a 1.9 percent increase in 2013.
About 200 of the redundancies at Boral announced today occurred in late 2012, and most of the rest will be completed by March, the company said. The company will see about A$37 million in savings in fiscal year 2013, it said.
Mike Beardsell, divisional managing director for Boral’s cement division and Building Products Managing Director Bryan Tisher will leave at the end of January as part of the restructure, Boral said.
Operations Manager Ross Harper will expand his duties to take over Beardsell’s responsibilities, and Darren Schulz will become executive general manager of a smaller building products division, it said.
Australian job advertisements dropped for a 10th month in December, capping the worst skid since the 2009 global recession, and economists forecast that a government report tomorrow will likely show the unemployment rate rose to 5.4 percent in December from 5.2 percent.
Bluescope Steel Ltd. (BSL), Australia’s largest steelmaker, said this week it will cut about 110 employees and 60 contractors in the next few months, as it shrinks production amid weaker demand for steel.
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