This article first appeared on GuruFocus.
Revenue: $10.6 billion, broadly flat year-over-year.
EBITDA: $2.1 billion, up 2%.
EBIT: $1.6 billion, up 1%, with margin expanding 40 basis points to 14.7%.
Underlying NPAT: $920 million, flat year-over-year.
Statutory NPAT: $655 million on a continuing operations basis, up 35%.
Earnings Per Share: $2.26, flat year-over-year.
Operating Cash Flow: $2.1 billion, up 6%, with 99% EBITDA cash conversion.
Net Debt: Reduced by $515 million to $3.7 billion, with leverage down 12% to 1.76 times.
Dividends: Total dividends increased 3% to $0.64 per share, fully franked.
WesTrac Revenue: $5.8 billion, down 6% due to normalization of capital sales.
WesTrac EBIT: $647 million, up 1%, with margin expanding to 11.2%.
WesTrac Services Revenue: $4.1 billion, up 6%.
Boral Revenue: $3.8 billion, up 5%.
Boral EBIT: $535 million, up 14%, with margin expanding 113 basis points to 14.1%.
Boral Operating Cash Flow: $779 million, up 13%.
Coates Revenue: $1 billion, down 3%.
Coates EBIT: $270 million, with margin maintained at 26.7%.
Beach Production: 19.4 million BOE, down 2%, with revenue of $1.8 billion and EBIT of $559 million.
Expenses: Reduced by 3%.
Net Finance Expense: $299 million, down 6%.
Release Date: August 11, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
SGH Ltd (ASX:SGH) delivered earnings growth in line with guidance, with EBITDA up 2% to $2.1 billion and EBIT up 1% to $1.6 billion, alongside margin expansion.
Strong cash generation with operating cash flow of $2.1 billion, representing 99% EBITDA cash conversion, up from 95% in the prior year.
Leverage reduced by 12% to 1.8 times net debt to EBITDA, below the target range, supporting a 3% increase in fully franked dividends to $0.64 per share and a $500 million on-market buyback.
Boral delivered strong performance with EBIT up 14% to $535 million, margin expansion of 113 basis points to 14.1%, and volume growth across all products, led by 7% growth in concrete.
WesTrac’s services revenue grew 6% to $4.1 billion, with record rebuild activity and a strong medium-term capital sales pipeline, despite normalized capital sales.
Safety metrics improved significantly, with LTIFR down 38% to 0.5 and TRIFR down 29% to 2.2, reflecting a strong operational focus.
Crux LNG project is on track for first gas in FY28, with construction advanced and marketing commenced, expected to add a new long-life earnings stream.
Property development opportunities, including Ravenhall and Waurn Ponds, are progressing, with potential for significant value creation through data centers and industrial use.
Negative Points
Coates’ earnings were below expectations, with revenue down 3% to $1 billion and EBIT flat at $270 million, impacted by a competitive market and pricing pressure.
WesTrac’s capital sales normalized to $1.6 billion, down from prior levels, and are expected to remain flat in FY27, with a further moderation in capital sales.
FY27 guidance is for flat to low-single-digit EBIT growth, impacted by an estimated $80 million currency translation headwind from WesTrac parts pricing.
Equity accounted earnings from Beach and Southern Cross declined by $39 million, with Beach’s production down 2% and lower contributions.
The proposed domestic gas reservation framework is described as a fundamental threat to the domestic gas industry, posing risks to Beach’s operations and Australia’s energy security.
Statutory NPAT was impacted by $315 million in significant items, including a $273 million mark-to-market impairment of investments in Beach and Southern Cross Media.
Coates’ financial utilization declined due to a more competitive market, with price realization a key challenge, though time utilization improved to 61%.
Net finance costs, while down 6%, remain elevated at $299 million, and the effective tax rate is expected to rise to about 27% in FY27.
Q & A Highlights
Q: Can you provide a range for the further moderation in WesTrac capital sales in FY27 and how you see the phasing beyond FY27?A: Ryan Stokes (CEO & MD) stated that the through-the-cycle capital sales volume is around $1.6 billion, which is consistent with the current level of $1.65 billion and is expected to remain broadly consistent for FY27. Looking longer-term, the medium-term opportunity pipeline is robust and stronger than in recent years, with expansion projects, reinvestment, and fleet renewal expected to drive a stronger dynamic in capital sales into FY28 and FY29.
Q: What is the expected impact of the parts price change and currency translation on WesTrac’s FY27 results?A: Ryan Stokes (CEO & MD) noted that the currency movement has resulted in a mid-single-digit negative impact on parts pricing in the first half. Richard Richards (CFO) quantified this, explaining that the re-translation of parts and components delivers roughly a $40 million hit on day one (July 1), and the 5% to 6% decrease in revenue translates through to another approximately $40 million drop, totaling an approximate $80 million pure currency impact flowing through WesTrac’s result in FY27.
Q: Can you elaborate on Coates’ utilization increase to 61% despite earnings being down, and the competitive environment?A: Ryan Stokes (CEO & MD) explained that while time utilization improved, the key driver of returns is financial utilization, which stepped down due to a more competitive market impacting price. He acknowledged that part of the result is market-driven, but also noted there is more work to do in sales execution to capture price. The company is focused on driving price as a key lever of performance in FY27, with the biggest opportunity being to improve operating leverage and returns.
Q: How is the FX headwind assumed in the second half of FY27, and are there any other factors to consider?A: Ryan Stokes (CEO & MD) stated that the company assumes a zero outcome in the second half regarding currency changes, as forecasting FX is difficult. He also noted that the usual movement in price revaluation typically occurs on a calendar year basis, which could be another factor in the second half that is not yet visible.
Q: Can you provide an update on Coates’ regional performance and where the competitive pressure is most pronounced?A: Ryan Stokes (CEO & MD) reported that New South Wales has been consistent and robust, WA is slightly up, while the North (Queensland) has been more challenging with excess gear waiting for delayed projects. The South (Victoria) has been consistent but soft, with more activity in SA and Tasmania. Utilization is strongest in West and East, with opportunities to grow in Queensland and South. The competitive pressure is more pronounced in regions like Queensland, where there is excess equipment.
Q: Is the goal for Coates to get price increases above cost inflation in FY27?A: Ryan Stokes (CEO & MD) confirmed that the goal is to drive price realization up and above cost inflation, which is a major focus. He noted that while price is a key lever for financial returns, the company also has other cost management levers to maintain margins. The focus is on improving operating leverage and returns through better price realization.
Q: Can you provide an update on the Penrith Lakes Development Corporation (PLDC) and its fill approval?A: Ryan Stokes (CEO & MD) explained that the PLDC focus has shifted from residential rezoning to employment and infrastructure opportunities through industrial applications. The fill approval is a positive lead indicator, and the company sees strong interest from other companies for potential applications, including data centers, given the site’s proximity to core infrastructure and a large lake. The company is actively pursuing the highest and best use for its property assets.
Q: What is WesTrac’s market share, and do you have a target for growth?A: Ryan Stokes (CEO & MD) noted that WesTrac has achieved significant market share gains in New South Wales, with share in the 60%-70% range for the resource sector. In WA, the focus is on driving share above 50%, while in construction equipment, share is in the 30s. The company focuses on winning major project tenders, which will flow through to market share over time, and is committed to leveraging its product and value offering to increase share.
Q: Would you consider more smaller bolt-on deals within existing segments to drive growth, given the limited large transformational options?A: Ryan Stokes (CEO & MD) confirmed that the company is concurrently pursuing both larger material acquisitions and smaller bolt-on deals. Significant capital is being invested in Boral for network investments, and Coates is looking at opportunities to build scale through fleet and network. The medium-term ambition of 10% EBIT growth will require a combination of organic and inorganic M&A.
Q: Can you provide an update on the electrification trials at WesTrac and the competitive landscape?A: Ryan Stokes (CEO & MD) discussed the battery electric truck trials with BHP and Rio, noting that Caterpillar will have solutions for customers’ emission reduction pathways, including battery electric, diesel electric connectivity to the grid, and autonomy. He emphasized that Caterpillar’s success comes from the entire offering, including autonomy, which is the only real autonomous solution working at scale, and the focus is on delivering superior cost per ton for customers.
Q: How is the buyback execution being considered following the results?A: Richard Richards (CFO) stated that a buyback committee, a subcommittee of the Board, has been established. The company will look at where the stock trades and has the capacity to execute the buyback when appropriate. With leverage at 1.76 times and $2.1 billion of operating cash flow, the company has sufficient FFO to fund the buyback over the next six months. The decision will ultimately be made by the subcommittee.
Q: What is the expected effective tax rate for FY27?A: Richard Richards (CFO) expects the effective tax rate to be about 27% in FY27. This reflects the greater proportion of earnings coming from directly controlled businesses, which sit at 30%, with aberrations from equity accounted profits and unrealized capital losses that are currently unbooked.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.