Boral adds $2b in value as Kerry Stokes finds right CEO
Vik Bansal’s success in revitalising the construction materials group was behind the decision to name him one of The Australian Financial Review’s Business People of the Year for 2023.
A decision by the majority owners of Boral, the Rich Lister Stokes family, to poach Vik Bansal to run the construction materials group has paid off handsomely.
The sharemarket value of the cement, asphalt and gravel group has increased by $2 billion in 12 months, after Bansal pushed through price increases of more than 12 per cent to offset rising input costs, and embarked on a decentralisation strategy aimed at unleashing a more entrepreneurial mindset among managers.
Brick by brick: Vik Bansal says a “good to great” strategy will take several years to come to fruition. David Rowe
Bansal’s success in revitalising Boral, which had been languishing despite an infrastructure boom, was behind the decision to name him one of The Australian Financial Review’s Business People of the Year – awarded to leaders, builders, pioneers and stirrers who have most shaped Australia’s business landscape.
The straight-talking Bansal calls his approach an “operator and owner’s mindset”.
Under the decentralisation program, local managers have more decision-making power and greater accountability for delivering profits and cost-cutting.
Rigorous monthly business reviews at all levels of business units are embedded across the company.
Elsewhere, there is a clear strategy to manage costs and improve service and responsiveness to customers.
Biggest beneficiary
The improvements translated into a 37.6 per cent increase in earnings before interest, taxes, depreciation, and amortisation in the year to June 30, and have helped send Boral shares to around $5, from $2.98 at the start of January.
The biggest beneficiary of the price rise has been the Stokes family, led by media entrepreneur Kerry Stokes, which holds close to 72 per cent. It was Kerry Stokes, and his son and Boral chairman Ryan Stokes, who recruited Bansal, who started in October 2022.
When the Stokes’ came knocking, Bansal had spent 15 months running steel group InfraBuild, part of the global GFG Alliance owned by British billionaire Sanjeev Gupta, but wanted to run a large ASX-listed company again.
The financial cloud sitting over the global Gupta empire as it scrambled to refinance $5 billion in funding, which had previously come from the collapsed Greensill Capital, was also playing a role in his preparedness to jump ship.
Turnaround strategy: under Bansal, Boral shares have risen to around $5, from $2.98 at the start of January. Brent Lewin
It is hard to underestimate the challenges that were facing manufacturers in 2022-23. In Boral’s case, the price of materials used to make concrete, cement and asphalt rose 16 per cent, the cost of transport was up 19 per cent, and energy costs ballooned by 21 per cent.
Green shoots
Bansal declined to comment for this article, given his view that the turnaround is a long way from being complete.
He has been telling analysts and fund managers there are early “green shoots” of success, but much more work is needed. A “good to great” strategy will take several years.
Bansal’s mantra internally is that cost discipline is not a one-off “event”. Everyday vigilance and “real-world” attention are needed in all corners of the company. Standardising and simplifying processes at a national level will help.
The chief executive is also a big believer in handing more accountability to managers a fair way down the management chain. Individual sites are responsible for making their operations profitable. Problems need to be fixed. Top performers are encouraged to go even further and measure themselves against external “stars” in their industry. Meanwhile, Bansal wants to be across the detail, and understand the levers that can be pulled to improve profitability.
Bansal was a hard taskmaster in a previous role, finding himself in the ASX spotlight when he was CEO of waste management group Cleanaway, a stint that ended prematurely.
He resigned from Cleanaway in January 2021 in a “mutually agreed” decision with the board, following allegations about a “culture of bullying and harassment” under his leadership.
The share price at Cleanaway rose 300 per cent during his tenure. Bansal poached some Cleanaway executives to join him at Boral as part of the turnaround.
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