Brickworks shares soared more than $2 each at one stage yesterday or close to 15%, after it produced a mixed result showing poor returns from operations, but a rise in investment returns.
It was the latter fact that prompted investors to bid up the shares strongly to where they closed up $1.79 at $15.75, a rise of 12.8% on the day.
The shares rose strongly on a day when the market overall was weak.
Brickworks said full-year profit for the 2009 year trebled as it benefited from the rising value of investments, even as the building industry struggled with housing starts down again.
Net profit rose to $305.2 million for the 12 months to July 31 compared with $101.5 million in the prior corresponding period.
Revenue rose 7% to $593.5 million.
Brickworks said its normalised profit, which removes one-off items, rose 5.1% to $113.7 million.
The company will pay a final dividend of 26.5 cents per share, taking the full-year distribution to 39 cents, unchanged from last year and as always, the best sign of the real thinking in a company about the outlook.
Obviously the company is thinking conservatively
"Brickworks’ strategy of asset diversification has provided steady earnings despite the extremely difficult economic climate," chairman Robert Millner said in a statement.
"The directors are particularly pleased to have been able to maintain a steady full year dividend after ten years of consecutive increases, in contrast to many of our peers."
Earnings before interest and tax (EBIT) at the building products division slumped 31% to $37 million as the company mothballed several manufacturing plants during the downturn to manage brick and tile inventory levels.
There were also increases in input costs, as the price of natural gas, electricity and manganese rose.
The land and development division’s EBIT declined 56.7% to $40.6 million.
"The increase in activity from the First Home Owners Grant has to date not outweighed the negative effects on the industry caused by the lack of availability of construction finance and the absence of second and third home buyers, as well as investors in the market," chief executive Lindsay Partridge said.
The company’s investment division’s EBIT more than doubled to $95.4 million, as its 42.8% holding in partner firm Washington H Soul Pattinson increased (see below).
Mr Partridge said the outlook for Brickworks was positive, as the building industry looked set to recover.
"The outlook for the coming year is for another solid result boosted by an expected recovery in Building Products, lower borrowing costs and another solid return from Investments," he said.
"The anticipated recovery in dwelling construction activity during the coming year is predicated on pent up demand for housing, the continuation of the First Home Owners Grant in a reduced form, low interest rates, improved construction finance availability and a continuation of improved housing affordability.
"Total dwelling commencements for Australia fell 17.3% to 131,061 during the year ended 30 June 2009, compared to 158,536 for the year ended 30 June 2008.
"While the First Home Owners Grant has been reasonably successful in providing a boost to building activity, high fall over rates prior to commencement combined with unusually long delays from enquiry to commencement stage have limited its impact.
"The increase in activity from the First Home Owners Grant has to date not outweighed the negative effects on the industry caused by the lack of availability of construction finance and the absence of second and third home buyers, as well as investors in the market."
But Brickworks also warned on the possible effect on the housing industry of higher interest rates.
"The prospect of increasing interest rates poses a significant risk and could stifle the housing recovery before it gains sufficient momentum to be sustainable," the company said.
Brickworks said it reduced debt by 29% over the year to $400 million.
Brickwork’s linked partner, Washington H. Soul Pattinson and Company revealed net profit for the Group after tax and before non-regular items of $224.7 million for the year ended 31 July 2009, an increase of 98.6% over the previous year.
The company said the increase was "primarily attributable to improved results from New Hope Corporation Limited (New Hope) in both operations and treasury, Pitt Capital Partners Limited and SP Telemedia Limited.
"Net profit attributable to shareholders was $1.1 billion, in excess of 12 times that of the previous corresponding period.
"The net profit on non-regular items of $888 million is principally composed of the Group’s $1.03 billion share of the profit on the sale of New Hope’s New Saraji coal project and impairment of investments in associated companies of $127.9 million."
The final fully franked dividend is up 5.6% to 19 cents per share, compared with 18 cents per share fully franked for the previous corresponding period.
But the company says it plans to pay a fully franked, special dividend of 25 cents per share in respect of the Group’s $1.03 billion share of the non-regular profit on the sale of the New Saraji coal project by New Hope is also recommended.
These dividends are to be approved by shareholders at the Annual General Meeting and will be payable on 7 Decem
