Housing downturn spanner in works

BRICKWORKS’ full-year profit slipped 11.9 per cent to $154.6 million as record earnings from its industrial property portfolio failed to offset the impact of Australia’s cooling housing market.

Higher energy prices and lower demand over the 12 months to July 31 contributed to a 18 per cent fall in earnings at the Sydney-based conglomerate’s Australian building products division.

Investments earnings fell 16 per cent after Round Oak Minerals – which is part-owned by Brickworks through its interest in Washington H Soul Pattinson – reported a large full-year loss.

But once $37 million in oneoff hits and a $34 million impairment against Brickworks’ Auswest Timbers hardwood assets were stripped out, underlying profit from continuing operations hit a record $234 million.

The four per cent rise in underlying profit and a forecasted drop in energy costs apparently cheered investors, who drove Brickworks’ shares up by as much as 8.1 per cent on Thursday.

“Operational performance across most divisions was encouraging, given the headwinds associated with declining market activity and significantly higher energy prices, which added $12 million in costs compared to the prior year,” chief executive Lindsay Partridge said.

“On the east coast, earnings in Austral Bricks and Bristile Roofing proved resilient, particularly in Victoria.”

Mr Partridge flagged a soft first half to FY20 for local building products but said energy costs should fall as Brickworks transitions to the wholesale gas market in January.

Austral Masonry earnings fell but a surge in demand improved Austral Precast results on the back of the nationwide cladding and structural integrity building crisis.

Brickworks raised $208 million late last year by trimming its interest in Soul Patts from 42.7 to 39.4 per cent, netting $208 million to fund North American expansion. The ASX-listed group recorded $121 million in revenue over eight months from its purchases of US brickmakers GlenGery and Sioux City Brick.

“These acquisitions followed a thorough strategic review, which identified the North American brick industry as a highly attractive long-term growth opportunity for Brickworks,” Mr Partridge said.

Brickworks raised its final dividend by two cents to 38 cents.