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Rinker: break-up a huge success

By Scott Rochfort

July 21, 2004


Rinker Group declared its demerger from CSR a "resounding success" yesterday, after the US-focused construction materials group raised its full-year forecasts and reported a strong first-quarter profit.


Shares in Rinker raced to an all-time high, as the company forecast increased pre-tax full-year profit by 20 per cent, thanks to a resilient US housing sector and strong price increases for cement and concrete.


In May, Rinker tipped profit growth of 5-to-10 per cent.


Rinker shares closed 61c, or 7.7 per cent, higher at $8.49, after the company reported a first-quarter net profit of $134.3 million, up 26 per cent on the previous year. With the result beating market expectations of a net profit closer to $110 million, Rinker chief executive David Clarke credited strong demand in the company's principal states of Florida and Arizona.


Mr Clarke said the 23 per cent rise in pre-tax profits in Rinker's Australian Readymix division to $51 million was a result of price increases, high demand and relatively good weather during the quarter.



"Construction activity - particularly residential construction - has been very strong in the last two months, a lot stronger than we would have thought.


"Housing remains strong in our major markets and there are no signs of a decline, despite predictions of a slowdown due to interest rates," Mr Clarke said. The company generates around 80 per cent of its profits in the US.


At Rinker's annual meeting in Sydney yesterday, Mr Clarke said the company was being helped by cement shortages in Florida, thanks to serious plant problems at key competitors.


The Rinker profit upgrade came just days after CSR upgraded its full-year profit forecasts, further buoying other building material stocks with large US operations, such as Boral, whose share price hit an all-time high of $7.11, before closing 26c higher at $7.04.


Boral takeover target Adelaide Brighton rose 2c to $1.39.


Rinker played down concerns over heavy cost increases in steel, energy and ocean freight, saying recent price increases in cement and concrete had "so far been more successful and widespread than we anticipated".


Mr Clarke also expressed optimism of a road funding bill being debated in both the US Senate and House of Representatives, which he said could boost federal road funding by up to 46 per cent.


"Rinker's performance has also helped crystallise the success of the demerger from CSR Limited," Rinker chairman John Morschel said.


Since the demerger in March last year, the combined Rinker-CSR share price has risen from $6.45 to $10.79.


Given Rinker's low debt levels and strong cash flows, Mr Morschel said the company would not opt for paying its shareholders a special dividend, because its current $100 million share buyback gave it the "ability to stop the buyback should suitable acquisitions emerge".


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  • 1 month later...

Rinker is a share I have held since the split last year, though my holding in CSR goes back very many years and grew during the time dividends were invested in shares and capital sums were accepted for new shares at a 5% discount.


Lets not get carried away by the more recent success of CSR and in particular Rinker, as the combined price is only up about 50% over more than 20 years. Fair enough that CSR were into mining in the 70's and 80's, like many they were slow to divest and lost a bundle of cash in the 80's.


Still, so much for the past, everything in the garden is smelling of roses now. Next call for RIN is of course A$10, which should be achieved as the U.S. recovers, even if very slowly due to the continued lack of growth in countries like Germany and France.


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Rinker are now at A$8.78 and should go through the $9 mark on the way to $10. My number one ASX 50 stock for this year is still looking good and cheap as the USA gradually recovers to former growth levels.
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Rinker have recovered to $8.73 up 18 cents and look now to be building another base to go through the $9 barrier.
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  • 3 weeks later...
Another base is not what Rinker appear to be building after retreating to $8.40, still they seem to drop back from each high in a regular pattern, so a rebound can be expected again, imho.
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I feel very confident about this stock after recent U.S growth forecasts. I felt certain it would rush through the $9 level and on to $10 quite quickly. Infact it appears to have stalled for the moment, perhaps looking for a good statement.
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The CEO of Rinker Group has made a presentation to Merrill Lynch.





If you have slow download go direct to the ASX website.

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  • 4 weeks later...
After failing again to break the $9 barrier and hold above it, Rinker at $8.93 this morning may well be attempting another run.
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