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Adbri wins BHP extension to supply Olympic Dam

Business

A four-year contract extension to supply cement and lime to BHP’s Olympic Dam mine will help Adelaide-based Adbri make up for recent revenue declines.

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The construction materials company has announced the extension, which it says has an aggregate value of about $160 million over the full six-year term.

The extension is in line with the existing contract terms and runs through to mid-2026, marking a 20-year supply relationship with BHP.

Adbri – formerly known as Adelaide Brighton – announced on July 3 that it had lost a lime supply contract with aluminium producer Alcoa of Australia.

The contract, which Adbri says is worth about $70 million a year, will end in June 2021 after an almost 50-year relationship.

The company posted a net profit after tax of $29.1 million for the first half of 2020, despite declining cement revenues amid a construction downturn.

Adbri’s revenue was down 7 per cent to $700.7 million following a 6 per cent slump in cement sales, but lime sales were up 4 per cent following strong demand from the Western Australian gold and nickel markets.

The BHP extension is a positive sign for the company that saw its share price fall more than 30 per cent after the Alcoa announcement in July.

Adbri shares were trading at $3.15 on July 2 but had fallen to $2.15 by July 7. They have since recovered to $2.81.

“We are pleased to extend our long-term relationship with BHP at its Olympic Dam Project which demonstrates the strength of our integrated cement and lime position as well as our high quality and cost-competitive product offering,” Adbri CEO Nick Miller said following the extension.

“We thank BHP for supporting a home-grown manufacturer over an imported product which protects local jobs and benefits the broader South Australian economy.”

The ASX-listed company traces its origins to 1882, when Welsh immigrant William Lewis opened Brighton Cement Works by Brighton Road in Adelaide as the country’s first Portland cement manufacturer.

The company has 44 quarries, 95 cement plants and 16 cement and lime depots across Australia.

Shareholders voted in May this year to ditch its local South Australian references and change its name from Adelaide Brighton to ADBRI Limited.

Adelaide Brighton was ranked No.6 in InDaily‘s South Australian Business Index 2019, which showcases the state’s top 100 local companies.

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