Earnings per share up 16% Important Note: Results are unaudited,
and shown under A-IFRS. See Note 1. SYDNEY, Australia, Jan. 30
/Xinhua-PRNewswire-FirstCall/ -- Rinker Group Limited ("Rinker" ASX
and NYSE: RIN) today announced that earnings per share (EPS) for
the three months ended 31 December 2006 (QED06), rose 16% to 20.3
US cents per share, compared with the December quarter 2005
(QED05). Earnings per ADR were US$1.02 cents. Profit and profit
margins rose in all major US business segments, despite lower
volumes due to the housing correction. Return on funds employed
(ROFE) was higher in all US businesses - except the concrete, block
& asphalt segment. ROFE was also higher in the Australian
operations, trading as Readymix. Net profit after tax (PAT)
increased 13% to US$182 million, and earnings before interest and
tax (EBIT) rose 8% to US$269 million. Trading revenue was up 4% to
USD$1,286 million. These results include the US$5 million pre-tax
cost of the defence against CEMEX's hostile takeover offer and a
US$16 million tax consolidation gain for Rinker (a recent amendment
to Australian tax law allowed Rinker to increase the tax cost base
of various assets. This generated a one-off reduction in deferred
tax liabilities for Rinker). On a comparable basis, excluding the
impacts above, EPS was up 9%, PAT up 6% and EBIT up 10% to US$274
million. For the nine months of Rinker's fiscal year to 31
December, EPS was up 16% to 65.6 US cents, PAT up 13% to US$592
million and EBIT up 13% to US$918 million. Trading revenue was
US$4,151 million, up 9%. Other key measures: - Earnings before
interest, tax, depreciation and amortisation(2) (EBITDA) rose 8% to
US$325 million for the December quarter. For the nine month period,
EBITDA was up 12% to US$1,084 million. - EBIT and EBITDA profit
margins rose in all US major business segments, both for the
quarter and year to date. - Return on funds employed (3) (ROFE) was
37.0%, up from 36.5% compared with the previous 12 months. - Return
on equity (4) was 35.2%, up from 26.8% a year earlier. In the US,
solid non-residential/commercial and infrastructure construction
activity levels, together with higher prices and an effective cost
savings program - $75 million for the nine months to December
across the group - helped mitigate the impact of the rapid housing
decline. For the US subsidiary, Rinker Materials Corporation, EBIT
and EBITDA rose 9% for the quarter as revenue declined slightly.
EBIT margins rose from 21.7% to 24.0% for the quarter. EBITDA
margins rose from 25.8% to 28.4%. Volumes were lower across all
major US product lines, except asphalt, during the quarter.
Double-digit price increases were recorded in all products except
concrete pipe (up 7%) and concrete block (up 5%). ROFE was up
slightly to 41.4%. In Australia, Readymix lifted trading revenue
l5% to A$405 million. EBIT rose 8% and EBITDA 6%. ROFE was 24.6%
from 22.2% a year earlier. Strong results in Western Australia,
south-east Queensland and country areas helped offset weak New
South Wales markets, where housing starts are down 12% year-
on-year. Prices rose only slightly but cost savings of A$19 million
(US$15 million) so far this year eased the slippage in margins.
Chief Executive David Clarke said the environment was challenging
but Rinker people on both sides of the Pacific had responded well
and the group's overall performance was generally satisfactory. "We
have managed to enhance margins and returns across much of the
business, despite higher costs and lower volumes. It puts us in a
strong position as the US housing market begins to show signs of
stabilising." Financial measures Net debt(5) was US$1,066 million
at end December. Gearing or leverage(6) (net debt over net debt
plus equity) was 31.7%, net debt/equity was 46.4% and net debt to
EBITDA(7) was 0.7 times. EBIT interest cover(8) was 42.2 times.
Rinker's financial leverage increased following the return of
US$626 million to shareholders via a capital return and special
dividend in July and August last year. In addition, US$155 million
was invested in the share buyback, prior to it being put on hold in
October due to the CEMEX takeover offer. Free cash flow(9) in the
December quarter was US$242 million, from US$253 million in the
corresponding quarter last year. Year to date, free cash flow is
US$512 million, down 12% on the previous year. Tax payments to date
have been a higher proportion of the total than last year. In the
nine months to end December, US$358 million was approved for
acquisitions and expansion of the base business, including work on
the new US$220 million Florida cement plant, due to come on-stream
in early 2008. Rinker's financial position is strong, and the group
is well-equipped to handle a major, value-adding acquisition or
other growth opportunities. Business results Rinker Materials -
Aggregates EBIT was up 20% to US$75 million for the third quarter.
Volumes were down 9%, including down 14% in Florida, compared with
a year earlier. EBIT margins were 26.7% from 23.3% in the December
quarter 2005, due mainly to strong price increases and cost
savings. - Concrete, block & asphalt EBIT was US$85 million, up
1%. Concrete volumes were down 8%, including down 4% in Florida
(heritage volumes in Florida fell 13%). Block volumes in Florida
and Nevada were down 33%, including 36% in Florida (with heritage
operations down 43%) as housing activity slowed rapidly. EBIT
margins increased slightly to 15.8%. - Cement EBIT was up 20% to
US$36 million. Margins were 32.4%, up 6.1 percentage points.
Volumes were down 12% but prices increased 13%. Cement import costs
were down 10% over a year earlier, largely due to lower freight
costs for the quarter. - Concrete pipe EBIT rose 11% to US$33
million, as volumes fell 13% but prices increased. Cement and raw
materials costs were higher but offset by ongoing operational
improvement cost savings. Readymix - Aggregate volumes were
generally strong except in the Sydney market. Average prices were
steady. - Australian concrete volumes were higher and prices
increased 4% as non- residential and infrastructure markets
remained strong. Strategy In recent months there has been a
significant step-up in the number of acquisitions by Rinker. A
total of US$54 million was invested in four acquisitions during the
December quarter, as the slowdown in US housing prompted a number
of private owners to sell their businesses. "These bolt-on
acquisitions are providing a meaningful level of value- adding
growth for us, as they have over the past few years," said Mr
Clarke. "We expect the climate for acquisitions to remain positive
this year as owners are more inclined to sell." Being the low cost
operator in our markets is an important component of Rinker's
strategy. The rate of cost savings has doubled and is expected to
be over US$100 million for the total year as the group works to
offset the US housing slowdown. Operational improvement savings in
the December quarter totalled US$32 million - US$25 million in
Rinker Materials and US$7 million in Readymix. More than 1,000 jobs
have been removed, through attrition and volume related reduction
of positions, primarily in businesses most impacted by the housing
correction - such as Florida concrete and block. Regarding the
CEMEX takeover bid, Rinker is actively reviewing various
alternatives and continues to recommend that shareholders take no
action in relation to the CEMEX offer. "I would reiterate that the
CEMEX offer for Rinker is far too low," said Mr Clarke.
"Shareholders should continue to reject the bid." Outlook Forecasts
of US construction activity generally predict a further decline in
housing, together with strong infrastructure and
non-residential/commercial activity. The housing correction in
Rinker's three key markets - Florida, Arizona and Nevada has been
extremely rapid with the latest US Commerce Department data showing
housing permits in these states down 35-37% for Rinker's fiscal
year to date (the nine months to December 2006). The steep decline
suggests a shorter duration for the correction, and there are
indications in parts of Florida, Arizona and Nevada that the
slowdown is stabilising. Non-residential and infrastructure
activity remains strong, particularly in Nevada and Arizona. Rinker
is supplying major projects such as the US$7.5 billion MGM Project
City Center in Las Vegas - expected to employ 50,000 people once
completed - and the US$350 million, 1,000-room Sheraton Downtown in
Phoenix. "The longer term fundamentals of high population and
employment growth, low personal taxes, and strong state fiscal
positions have underpinned Rinker's performance in these key states
over many years, and they will continue to support construction
activity in the future," said Mr Clarke. "The housing correction is
temporary. The impact is being moderated by the strength of the
other construction segments, our cost reduction program, the more
positive outlook for input costs - which are generally still
increasing but at a much lower rate than over the past two years -
and higher prices in our key markets." Mr Clarke said some price
increases were being implemented but implementation was more
challenging than previously in some products. In Australia, housing
is forecast to begin recovering from the second half of 2007, while
infrastructure and commercial construction remain at high levels.
Pent up housing demand is reflected in sharp increases in rents,
although the impact of recent interest rate rises is still to be
felt. Meanwhile, Rinker's real estate divestment and development
program announced in November is being implemented. It is expected
to deliver sustainable annual returns of US$30-35 million a year,
plus longer term, large projects such as Penrith Lakes in Sydney
and Brooksville in Florida. "Overall, it is difficult to predict
the short term impact of the US housing slowdown in some markets.
However our cost reduction program - together with ongoing price
increases and solid non-residential and infrastructure activity -
should maintain profitability in line with previous guidance," said
Mr Clarke. Forecast EPS for this fiscal year is around the bottom
of the 84 to 90 US cents range, excluding the tax consolidation
gain and takeover defence costs. "Over the medium to longer term,
the underlying strengths of our key markets mean the outlook for
Rinker is highly attractive." One of the world's top 10
construction materials groups, Rinker has operations in aggregates,
cement, concrete, asphalt and concrete pipe and products. Annual
revenue is over US$5.1 billion. Rinker has over 13,000 employees in
774 sites across the US, Australia and China. Around 80% of group
revenue comes from the US. Important Legal Information This
communication has been made public by Rinker Group Limited
("Rinker"). Investors are urged to read Rinker's Target's Statement
and Solicitation/Recommendation Statement on Schedule 14D-9
(including each exhibit thereto), which was filed by Rinker with
the U.S. Securities and Exchange Commission (the "SEC") on November
28, 2006, and all amendments thereto, as they contain important
information. Copies of the Solicitation/Recommendation Statement
(including this Target's Statement and the other exhibits thereto)
are, and other public filings made from time to time by Rinker with
the SEC which are related to the offer (the "Offer") by Cemex
Australia PTY Ltd, a wholly-owned subsidiary of Cemex S.A.B. de
C.V., will be, available without charge at the SEC's website at
http://www.sec.gov/ or at Rinker's website at
http://www.rinker.com/. This communication contains a number of
forward-looking statements based on management's current views,
expectations and beliefs as of the date of this communication. Such
statements can be identified by the use of forward- looking
language such as "may," "should, "expect," "anticipate,"
"estimate," "scheduled," or "continue" or the negative thereof or
comparable terminology. Such forward-looking statements are not
guarantees of future results or performance and involve risks,
uncertainties and other factors, including: the general economic
and business conditions in the United States and Australia; trends
and business conditions in the building and construction
industries; the timing and amount of federal, state and local
funding for infrastructure; competition from other suppliers in the
industries in which Rinker operates; changes in Rinker's strategies
and plans regarding its ongoing business strategy, acquisitions,
dispositions and business development; Rinker's ability to
efficiently integrate past and future acquisitions; compliance
with, and potential changes to, governmental regulations related to
the environment, employee safety and welfare and other matters
related to Rinker; changes in interest rates, weather and other
natural phenomena, energy costs, pension costs; healthcare costs;
outcomes of legal hearings such as the Lake Belt challenge and
other risks and uncertainties identified in our filings with the
Australian Stock Exchange and the SEC. Rinker can give no
assurances that actual results would not differ materially from any
forward-looking statements contained in this communication,
particularly in light of the many risks and uncertainties regarding
the Offer. None of Rinker, Rinker's officers, any persons named in
the Target's Statement with their consent or any person involved in
the preparation of the Target's Statement makes any representation
or warranty (express or implied) as to the accuracy or likelihood
of fulfilment of any forward-looking statement, or any events or
results expressed or implied in any forward-looking statement,
except to the extent required by law. You are cautioned not to
place undue reliance on any forward-looking information. For
further information, please contact Debra Stirling on + 61 2 9412
6680 or mobile 0419 476 546 (international + 61 419 476 546). (1)
All quarterly results are unaudited. Measures are based on
unrounded numbers. Rinker's US and Australian subsidiaries each
generate virtually all revenue and incur all costs in their local
currency. As a result, directors believe their performance is best
measured in their local currency. At the group level, Rinker
Materials represents around 80% of group result. As a result, US$
performance represents the most appropriate measure of Rinker's
performance and value. Under A-IFRS, Rinker's selected reporting
currency is US$, although Readymix results will continue to be
disclosed in both US$ and A$. (2) Reconciliation of EBIT and EBITDA
for the nine months ended 31 December 2006 EBIT represents profit
before finance and income tax expense. EBITDA represents EBIT
before Depreciation and Amortisation (DA). 9 months YTD US$ million
Dec '06 Dec '05 Variance 9 months 9 months % Segment Revenue
Aggregate 894 795 12% Cement 384 347 11% Concrete, block, asphalt
1,790 1,590 13% Concrete pipe and products 439 434 1% Other 278 270
3% Eliminations (547) (479) n.a Rinker Materials 3,238 2,957 10%
Readymix (US$) 913 836 9% Readymix (A$) 1,195 1,108 8% Consolidated
Rinker group 4,151 3,793 9% Segment EBIT Aggregate 235.9 191.1 23%
Cement 117.9 96.3 22% Concrete, block, asphalt 312.2 263.9 18%
Concrete pipe and products 115.4 97.7 18% Other 28.0 51.1 (45%)
Rinker Materials 809.4 700.1 16% Readymix (US$) 123.4 124.0 -
Readymix (A$) 161.7 164.4 (2%) Corporate (14.3) (8.5) (68%)
Consolidated Rinker group 918.4 815.6 13% Segment DA Aggregate 47.2
46.0 3% Cement 10.8 10.6 2% Concrete, block, asphalt 46.9 38.1 23%
Concrete pipe and products 18.3 18.6 (2%) Other 4.8 4.1 17% Rinker
Materials 128.0 117.4 9% Readymix (US$) 37.8 37.8 - Readymix (A$)
49.4 50.1 (1%) Consolidated Rinker group 165.8 155.2 7% Segment
EBITDA Aggregate 283.1 237.1 19% Cement 128.7 106.9 20% Concrete,
block, asphalt 359.1 302.0 19% Concrete pipe and products 133.7
116.3 15% Other 32.8 55.2 (41%) Rinker Materials 937.4 817.5 15%
Readymix (US$) 161.2 161.8 - Readymix (A$) 211.1 214.5 (2%)
Corporate (14.3) (8.5) (68%) Consolidated Rinker group 1,084.2
970.8 12% Reconciliation of EBIT and EBITDA for the quarter ended
31 December 2006 EBIT represents profit before finance and income
tax expense. EBITDA represents EBIT before Depreciation and
Amortisation (DA). December Quarter US$ million Dec '06 Dec '05
Variance Qtr Qtr % Segment Revenue Aggregate 280 267 5% Cement 112
115 (3%) Concrete, block, asphalt 535 529 1% Concrete pipe and
products 132 141 (7%) Other 77 91 (15%) Eliminations (165) (161)
n.a Rinker Materials 970 982 (1%) Readymix (US$) 316 261 21%
Readymix (A$) 405 352 15% Consolidated Rinker group 1,286 1,242 4%
Segment EBIT Aggregate 74.9 62.3 20% Cement 36.2 30.2 20% Concrete,
block, asphalt 84.6 83.5 1% Concrete pipe and products 32.8 29.4
11% Other 4.5 7.7 (41%) Rinker Materials 233.0 213.1 9% Readymix
(US$) 43.7 38.5 14% Readymix (A$) 56.2 52.0 8% Corporate (7.8)
(3.0) (163%) Consolidated Rinker group 268.9 248.6 8% Segment DA
Aggregate 15.6 15.8 (1%) Cement 3.6 3.4 6% Concrete, block, asphalt
16.1 13.1 22% Concrete pipe and products 6.0 6.3 (4%) Other 1.7 1.4
22% Rinker Materials 43.0 39.9 8% Readymix (US$) 12.7 12.0 6%
Readymix (A$) 16.2 16.2 1% Consolidated Rinker group 55.7 51.9 7%
Segment EBITDA Aggregate 90.5 78.0 16% Cement 39.8 33.6 18%
Concrete, block, asphalt 100.6 96.6 4% Concrete pipe and products
38.8 35.7 9% Other 6.2 9.1 (31%) Rinker Materials 276.0 253.1 9%
Readymix (US$) 56.4 50.4 12% Readymix (A$) 72.4 68.2 6% Corporate
(7.8) (3.0) (163%) Consolidated Rinker group 324.6 300.5 8% (3)
Reconciliation of Return on Funds Employed (ROFE) Return on funds
employed represents previous 12 months' EBIT divided by end of
period funds employed. US$ million Funds Funds As at and year ended
EBIT Employed ROFE EBIT Employed ROFE 31 December 2006 2006 2006
2005 2005 2005 Aggregates 307.2 927.6 33.1% 236.9 776.3 30.5%
Cement 164.1 386.4 42.5% 126.6 328.0 38.6% Concrete, block, asphalt
422.8 942.2 44.9% 332.9 694.0 48.0% Concrete pipe and products
151.0 312.8 48.3% 115.4 298.4 38.7% Other 43.2 59.7 n.a 69.8 39.8
n.a Total Rinker Materials 1,088.2 2,628.8 41.4% 881.6 2,136.5
41.3% Readymix (US$) 178.5 750.5 23.8% 158.8 691.8 23.0% Readymix
(A$) 234.0 949.7 24.6% 209.2 944.4 22.2% Corporate (18.3) (4.9) n.a
(12.4) (10.8) n.a Consolidated Rinker group 1,248.5 3,374.4 37.0%
1,028.0 2,817.5 36.5% Comparable ROFE, adjusting for the following:
Gain on sale of Emoleum in February 2006 (21.7) - - - Expense
related to takeover defence 5.0 - - - Consolidated Rinker group,
excluding the above 1,231.8 3,374.4 36.5% 1,028.0 2,817.5 36.5% (4)
Reconciliation of Return on Equity (ROE) Return on Equity
represents the previous 12 months' Net profit attributable to
members of Rinker Group Limited divided by Equity attributable to
members of Rinker Group Limited. US$ million As at and year ended
31 December 2006 2005 Net profit attributable to members of Rinker
Group Limited 806.0 670.2 Equity attributable to members of Rinker
Group Limited 2,288.2 2,504.9 ROE 35.2% 26.8% Comparable ROE,
adjusting for the following: After tax gain on sale of Emoleum in
February 2006 (15.7) - After tax gain on tax consolidation in
December 2006 (15.7) - After tax expense related to takeover
defence 3.9 - Net profit attributable to members of Rinker Group
Limited, excluding the above gains 778.5 670.2 Comparable ROE,
excluding the above 34.0% 26.8% (5) Reconciliation of Net Debt Net
Debt represents current and non-current borrowings less cash and
cash equivalents. US$ million 31 Dec 31 March 31 Dec As at 2006
2006 2005 Current borrowings 9.3 5.4 5.2 Non-current borrowings
1,203.2 645.2 609.3 Less: cash and cash equivalents (146.6) (289.1)
(312.7) Net Debt 1,065.9 361.5 301.8 (6) Reconciliation of
Gearing/leverage Gearing/leverage represents (a) Net Debt divided
by Equity and (b) Net Debt divided by Net Debt plus Equity. US$
million 31 Dec 31 March As at 2006 2006 Net Debt 1,065.9 361.5
Equity 2,298.3 2,687.3 Gearing/leverage (Net Debt/Equity) 46.4%
13.5% Gearing/leverage (Net Debt/Net Debt plus Equity) 31.7% 11.9%
(7) Reconciliation of Net Debt to EBITDA Net Debt to EBITDA
represents Net Debt divided by 12 months' EBITDA. US$ million As at
and year ended 31 December 2006 2005 Net Debt 1,065.9 301.8 EBITDA
1,468.0 1,232.6 Net Debt to EBITDA [times] 0.73 0.24 (8)
Reconciliation of EBIT Interest Cover EBIT interest cover
represents 12 months' EBIT divided by net interest expense. Net
interest expense represents 12 months' interest expense less 12
months' interest income. US$ million Year ended 31 December 2006
2005 Interest expense (a) 46.8 39.5 Interest income (17.3) (24.2)
Net interest expense 29.6 15.2 EBIT 1,248.5 1,028.0 EBIT Interest
Cover [times] 42.2 67.4 (a) Interest expense is shown before
interest capitalised related to financing major projects
constructed for internal use. (9) Reconciliation of Free Cash Flow
Free Cash Flow represents Net cash from operating activities less
(1) operating capital expenditures included in cashflows from
purchase of property, plant and equipment, (2) interest paid and
(3) payments for shares held in trust under long-term incentive
plans. US$ million Nine months ended 31 December 2006 2005 Profit
before finance and income tax expense 918.4 815.6 Depreciation and
amortisation 165.8 155.2 Net income tax (paid) (300.2) (121.4)
Change in working capital (72.5) (98.6) (Profit)/loss on asset
sales (9.4) (37.8) Interest received 13.3 18.0 Other (2.6) 43.9 Net
Cash from operating activities 712.8 774.9 Operating capital
expenditure (141.8) (140.7) Interest paid (31.9) (31.2) Payments
for shares held in trust (26.8) (22.7) Free Cash Flow 512.4 580.3
Capital expenditure summary: Operating capital expenditure (141.8)
(140.7) Development capital expenditure (141.6) (108.5) Total
purchase of property plant and equipment (283.3) (249.3) Purchase
of businesses (64.8) (33.0) Total capital expenditure (348.1)
(282.3) US$ million Quarter ended 31 December 2006 2005 Profit
before finance and income tax expense 268.9 248.6 Depreciation and
amortisation 55.7 51.9 Net income tax (paid) (79.5) (7.6) Change in
working capital 22.5 (24.4) (Profit)/loss on asset sales (7.1)
(3.5) Interest received 3.8 5.1 Other 24.3 36.4 Net cash from
operating activities 288.7 306.5 Operating capital expenditure
(37.6) (48.3) Interest paid (12.0) (5.6) Payments for shares held
in trust 3.1 0.2 Free Cash Flow 242.2 252.8 Capital expenditure
summary: Operating capital expenditure (37.6) (48.3) Development
capital expenditure (34.9) (43.9) Total purchase of property plant
and equipment (72.5) (92.1) Purchase of businesses (53.9) (20.3)
Total capital expenditure (126.4) (112.4) DATASOURCE: Rinker Group
Limited CONTACT: Debra Stirling for Rinker, +61-2-9412-6680, or
mobile 0419-476- 546 (international +61-419-476-546)
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