Property Earnings Boost Brickworks, Soul Patts Up Payout

Shares in Australia’s biggest brick maker Brickworks jumped more than 6% yesterday despite a weak full-year result.

While the company reported a 4% rise in underlying net profit to $234 million, net after-tax profit slid 12% to $154.6 million.

That was despite record results from its industrial property business were not enough to offset a weak performance by the Australian building products division (bricks and tiles).

The dividend was lifted by directors by 2 cents to 38 cents for the final, while the full-year payout was 57% cents a share up from 2017-18’s 54 cents a share.

The shares ended up 6.4% at $17.29 at the close.

Revenue from continuing operations rose 17% to $919 million for the year to the end of July.

The company said its property segment, one of its four divisions, performed exceptionally well in 2019, delivering record earnings before interest and tax of $158 million.

The company’s EBITDA (earnings before interest, tax, depreciation, and amortisation) rose 12% to $346 million

But higher energy prices and lower demand over the 12 months to July 31 contributed to an 18% fall in earnings at its Australian building products division, while investments earnings fell 16% after Round Oak Minerals — which is part-owned by Brickworks through its interest in Washington H Soul Pattinson — reported a large full-year loss.

Brickworks raised $208 million during the year by trimming its interest in Soul Patts from 42.7% to 39.4%. That money will be used to finance expansion in the US.

Chairman Mr. Robert Millner said in yesterday’s release: “The strength of the company’s diversification strategy underpinned the result. A significant increase in Property earnings and the initial contribution from our newly acquired brick making operations in North America, more than offset a decline in Investments and the impact of a cyclical downturn on Building Products Australia earnings.”

“As well as delivering record underlying earnings, the Company continues to build considerable asset value for shareholders. During the year, the inferred net tangible asset backing3 of the Group increased by $86 million to over $3.3 billion, and over the past decade it has more than doubled,” he said.

Directors warned of a soft first half to FY20 for its local building products thanks to the continuing weakness in new home and apartment approvals and construction.

Meanwhile, the weak performance by Round Oak Minerals saw Washington H Soul Pattinson, Brickworks’ major shareholder (Brickworks is Soul Patts biggest shareholder even after the share sale) report a 7% decline in earnings for the year to the end of July.

Soul Patts said net earnings were $247.9 million in 2018-19 after flooding and start-up costs drove its Queensland-based Round Oak Minerals subsidiary to a large loss.

Metals producer Round Oak’s loss widened from $9.7 million to $54.1 million for the year to July 31 as the impact of start-up expenses and increased corporate overheads was compounded by delays stemming from February’s North Queensland floods.

Elsewhere, income from a 25% stake in TPG Telecom fell 12.8% on the NBN rollout and the telco’s expensive decision to scrap construction of a mobile network and take big write-downs in asset values.

Soul Patts, which also holds stakes in coal miner New Hope, Brickworks and Australian Pharmaceutical Industries, said revenue from continuing operations grew 38% to $1.62 billion. That was thanks to the 21% in revenue for New Hope after buying a bigger stake in the Bengalla thermal mine in NSW’s Hunter Valley.

It will pay a final dividend of 34 cents a share (33 cents previously) which will take full-year dividends to 57 cents.

Soul Patts shares rose 2.2% to $22.78.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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