And 10.7: That’s the percentage drop in the value of Boral’s share price on Monday.
So how does a chief executive survive being another statistic?
He doesn’t because – numerous: That’s the number of shareholders who complained to Boral’s chairman Katherine Fagg about the company’s performance under the stewardship of Mike Kane.
There has been investor sabre-rattling going on at Boral for a while but since December when the company announced it had been hoodwinked and defrauded by some executives in the US windows division it has been amplified.
Thus since December it has not been a matter of ‘if’ but ‘when’ the board would announce Kane’s early retirement.
For his part Kane saw merit in leaving his post ahead of schedule so he announced his resignation on Monday. He will leave the building after he delivers the full-year result at the end of August.
Kane gets to retire before his 70th birthday and return home to the US.
His replacement will be faced with the challenges of improving the returns from the US business, dealing with weak housing starts in North America and with the ongoing fallout from Australia’s string of natural disasters.
And who that will be is unclear.
Between the questions and comments made by participants during Monday’s investor/analyst call it is hard to escape the conclusion they want fresh blood at the helm.
So many of the senior management have been tainted by the windows business scam – not because they had any involvement or were based in the US – but because it happened on their watch.
The list of potential internal candidates is short. Ross Harper, the group president of operations, has fallen victim to health issues (although he is set to return) and the head of Australia, Wayne Manners, is considered a little green to take the top job this year.
So an outside appointment appears most likely.
Meanwhile, there are numerous factors that have led to the latest profit downgrade. Even putting aside the windows business and the restatement of its earnings, the profits from the US division have been chronically disappointing since it was acquired in 2017.
Boral’s unaudited results for the six months to December 31 show underlying net profit has come in at $156 million, 18 per cent below the windows-related restated profit of $192 million from the previous corresponding period.
As far as investors are concerned the main problems fall at Kane’s feet or more particularly his decision to buy the US business Headwaters for $3.5 billion.
That isn’t how he sees it.
Kane has pointed to the Australian operations as having added to the company’s woes in the 2020 financial year.
Fires and floods have played havoc with local operations, forcing the temporary closure of some plants and the diversion of its water to firefighting efforts. Was it an act of God or global warming?
Kane won’t provide a view.
Nor can he shed any light on why in 2019 a couple of newly recruited finance executives inside the US windows business decided to fabricate the books – the inventory levels, the costs and the raw materials.
He says the investigations into the incident provided nothing to explain their motivation, other than it was not financial.
This will presumably be flushed out over time as the company initiates legal action against potential bad actors involved in this saga.
While the fraud is the headline-grabbing incident that led to Boral’s third act finale, the reality is that Boral’s troubles have been the result of slow-burn underperformance.
The accounting drama is more of a diversion from the bigger story.
Elizabeth Knight comments on companies, markets and the economy.