Rinker, the Australian building materials group, on Tuesday signalled that it was weathering the US housing market downturn, bolstering its attempt to force Cemex, the Mexican cement maker, to raise its US$12.8bn takeover offer.
Rinker reported that net profit rose 13 per cent to US$182m in the three months to December 31 compared with the same quarter a year earlier. The earnings came in at the upper end of analysts’ average forecasts, sending Rinker’s share price up 2.3 per cent to A$18.70 on the Australian Stock Exchange.
David Clarke, chief executive, said cost cuts were helping Rinker offset the US housing slowdown and would allow it to reap benefits once the US market rebounded. He maintained the group’s November forecast that earnings per share in fiscal 2007 would be at the lower end of a range of 84 to 90 US cents per share excluding tax benefits and costs from the takeover defence.
In October, Cemex launched a hostile bid for Rinker, offering US$13 per share, equivalent to A$16.81 at Tuesday’s exchange rate, which Rinker’s management rejected. The company underpinned its rejection with an independent assessment from Grant Samuel estimating a value range of A$20.58 to A$23.04, including a substantial premium for control.
Mr Clarke said Tuesday Rinker would continue to pursue ”value-adding alternatives’’ to Cemex’s offer without specifying whether the company was making progress in attracting alternative bidders or was instead mulling a major acquisition or break-up plan.
Scott Marshall, head of industrial research at Shaw Stockbroking, described the earnings as “very good,’’ especially as US volumes had held up. “For someone else to come in and bid for Rinker would be hard. It would also be extremely difficult for Rinker to launch its own acquisition at the moment because most of the targets have poison pills. It has to be agreed and I’m not sure how likely that would be”.
Rinker’s strong presence in Florida, Arizona and Nevada means that 80 per cent of its revenues are generated in the US.
Separately, Cemex reported a 55 per cent rise in its profit in the fourth quarter to US$377m. The Mexican group has extended its offer for Rinker until the end of March.
While the US housing slowdown is hurting revenues, it has helped Rinker make a series of small acquisitions there. Earlier this week, Rinker announced that it would buy a quarry and four concrete plants in Utah and three other concrete plants in Tennessee.
■ Meanwhile, Australia’s M&A flurry continued on Tuesday. Merrill Lynch Global Private Equity and Pacific Equity Partners offered A$823m for Veda Advantage, Australia’s leading credit-checking company, sending the company’s share up almost 18 per cent.
Symbion Health, Australia’s largest health-care company, rebuffed an offer from rival Primary Health Care on Tuesday after Primary announced its acquisition of a 5 per cent stake. Symbion didn’t disclose the offer's terms but said the bid was “at a significant discount’’. Symbion shares rose 10 per cent.
Santos, a gas producer, raised its bid for rival Queensland Gas by 3.2 per cent to A$710m, sending Queensland shares up nearly 18 per cent.