Brickworks’ building materials arm recently posted sales revenue of $358 million with earnings before interest, taxes and significant items (EBIT) for the half-year ended January 2016 up 24.9 per cent – a rise of $32.6 million compared to the previous corresponding period.
Across its whole portfolio, which also includes property development and investments, the group recorded an underlying net profit after tax of $75 million – a 19.4 per cent increase of $12.2 million year on year.
“The short-term outlook for building products is very positive,” managing director Lindsay Partridge said.
“With a long pipeline of work and price rises successfully implemented in our major markets, we expect the earnings uplift recorded in the first half to be maintained over the full financial year.”
All of Brickworks’ building products increased revenue compared to the same time last year, including its biggest seller, bricks, which grew by 5.2 per cent to $194 million, roof tiles which were up 10.9 per cent to $57.5 million and precast concrete which increased by 0.8 per cent to $34.4 million.
Only its masonry division experienced a drop after falling by 0.8 per cent to $44.5 million.
Brickworks attributed its success to increases in sales volume, higher prices and improved production efficiencies keeping manufacturing costs down.
Partridge said the strong result was also supported by a growth in its market share.
“Our products are becoming increasingly popular in key markets segments,” he explained. “For example, we have seen a significant increase in the use of face brick in high rise residential and commercial developments, on the back of our investment in high fashion and our strong links to the architectural community.
“The strength of our traditional and proven product portfolio has been reinforced in recent times by a number of costly and high profile failures of other unaccredited building products.”
Housing Boom
Booming construction markets in Melbourne and Sydney have fuelled demand, with Victoria and New South Wales, including the ACT, accounting for 62 per cent of Brickworks’ revenue.
However, Partridge warned further growth might be curtailed in the longer term.
When releasing the half-year results in late March, he said: “Residential building activity is now at the highest level on record, driven by the major markets of Sydney and Melbourne.
“As a result, the industry has now effectively reached capacity in these markets due to bottlenecks caused by trade and product shortages, although Brickworks substantially continues to meet all supply commitments.”
The outlook remains optimistic nonetheless, with Partridge saying in a trading update issued on Thursday, 9 June, that “momentum within the building industry continues unabated”.
The land and property development arm of the business out-performed the other divisions in the first half-year ended January 2016 with an EBIT of $45.4 million – up 17.3 per cent year on year – compared to $32.6 million for building products.
Despite the positive results, Partridge said the government not capitalising on Australia’s “abundant” natural gas reserves to lower prices is holding the manufacturing industry back.
One of Brickworks’ main competitors in the building and construction market, Boral, was similarly optimistic about demand for products when it announced its expected earnings for the current financial year in February.
It predicted “marginal” improvements in EBIT for both its construction materials and cement and building products divisions. Boral’s results are due to be announced around early July.
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