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Rinker Group, the Australian building materials maker fending off a takeover bid from Cemex, said third-quarter earnings rose 13 per cent, maintaining pressure on the Mexican company to sweeten its US$11.7 billion ($16.8 billion) offer.
Net income grew to US$181.6 million, or US20.3c a share, in the three months ended December 31, from US$160.7 million, or US17.5c, a year ago, the Sydney company said. Sales rose to US$1.29 billion from US$1.24 billion.
Chief executive officer David Clarke has blunted the impact of the biggest US housing slump since 1990 by raising cement prices and selling more asphalt and gravel for roads, saying the slowdown will be temporary as population and employment growth bolster demand.
"Cemex will have to increase its bid," said Scott Marshall, head of industrial research at Shaw Stockbroking in Sydney.
"Rinker's prices have been strong and they've had strong profit growth, even with the weak housing in the US. My belief is we're at or near the bottom of the market."
Cemex in October offered US$13 a share for Rinker in a bid to become the world's biggest cement maker. The Australian company's shares rose A5c to A$18.33.
Clarke reiterated in a telephone briefing with analysts that the offer from Monterrey-based Cemex was "far too low". Rinker has said it undervalues the company by as much as 36 per cent.
Rinker is poised to benefit quickly when housing demand recovers in the US because it focuses on the three states that will be the fastest-growing in the nation, says a US Census Bureau forecast. The company gets 80 per cent of sales in the US.
"Cemex' bid needs to be lifted above and beyond A$20 a share to achieve success," Rohan Gallagher, an analyst at Credit Suisse in Sydney, wrote in a note to clients this week. Shaw's Marshall said he expected the Mexican company would have to increase its offer to at least match the current share price.
Cemex has extended its bid for Rinker until March 30 while it waits for approval from US regulators for the deal, with Rinker having until the end of next month to submit information that may be necessary for the ruling.
Clarke said Rinker was continuing to seek alternatives to the takeover, without giving further details. He flagged in November that he was looking at options including mergers, acquisitions, asset sales or changing the structure of his business.
Companies such as Holcim, the world's second-biggest cement maker, or Lafarge, the biggest maker of building materials, have been suggested by analysts as potential suitors.
Clarke confirmed a November forecast that full-year earnings per share would be at the lower end of his forecast of A84c to A90c, excluding costs for the takeover defence and tax benefits. The company earned A80c a share last year.
Cemex' bid for Rinker would be the biggest takeover of an Australian company after a record year of acquisitions.
Proposed takeovers in the country jumped to US$200 billion last year, from US$111 billion in 2005.
Cemex is advised by Citigroup and UBS AG is assisting Rinker with its defence.
- BLOOMBERG
