Shares in Brickworks hit their all-time high after the company revealed a bigger than expected profit from its industrial property business with Goodman.
Investors lapped up not only the news but the shares and they surged 11.6% to $23.54 – the highest ever – during trading.
They eased a touch in final dealings to close up 11.32% at $23.40 – still the highest ever close.
It was an upbeat update from Brickworks on Wednesday which revealed the company – part owned by Washing H Soul Pattinson – now expects record-high earnings from its property assets in 2020-21.
Thanks to continuing strong interest from investors for prime industrial real estate, the company revealed a significant revaluation profit within its joint venture industrial property trust with Goodman Industrial Trust, with Brickworks’ share now expected to be around $100 million.
Brickworks told the ASX this will contribute to record property underlying earnings of $240 million to $260 million for 2020-21, up from $129 million in 2019-20.
Seeing the company revealed a statutory after-tax profit of $299 million for 2019-20 (up 93%) the company is looking at earnings (including its building products business, especially bricks which are in rising demand in Australia) to top $400 million when the books are ruled off on the 20120-21 financial year.
And investors are piling in because they can see a higher ordinary dividend or special payment with the final results in September. The company paid a final last financial year of 39 cents a share and judging by the way investors chased the shares yesterday they are punting on that being substantially increased later this year.
“We have seen strong demand and sustained growth in the value of our Property Trust over a number of years,” CEO Lindsay Partridge said in Wednesday’s statement.
“The COVID-19 pandemic has only fuelled this growth, by accelerating industry trends towards online shopping and increasing the importance of well-located distribution hubs and sophisticated supply chain solutions.”
The company also reported that an improving sales momentum in its building products businesses in Australia and North America.
The company says its Australian building product earnings are now expected to be higher than last year following a significant rise in housing approvals.
“(This is) now translating to increased building activity, with our sales particularly strong in Queensland and Western Australia over recent months,” Mr Partridge said.
“That said, the availability of some materials, such as timber for house trusses, is an issue in some areas, with the resultant delays likely to flatten and extend the duration of the existing pipeline of work.”
The US home building sector is shaking off the impact of Covid and home building is rising – though there are significant rises in costs, especially in timber (or lumber as Americans refer to it).
Brickworks though remains uncertain about the sustainability of the improvement in home building.
“Due to the uncertainty within building products and a lack of visibility of Investment earnings in the second half, which are driven by the Company’s 39.4 per cent shareholding in Washington H. Soul Pattinson, no guidance can be provided in relation to Brickworks’ net profit after tax,” Mr Partridge said in the statement.