Construction Ban Stymies Brickworks

The current spate of Covid-driven lockdowns and restrictions imposed on Sydney construction activity has forced Brickworks to cut production by around a third.

The news, revealed in a statement to the ASX also said that the company had stood down a number of manufacturing staff.

Brickworks joins Qantas in revealing staff stand downs because of the latest Covid Delta driven lockdowns.

Constriction in and around the Greater Sydney areas was halted for two weeks and activity has only been partially restored, with restrictions on sites allowed to resume work.

Brickworks said that while the partial restart had seen a small improvement, brick sales were only at 50% of pre-lockdown levels, resulting in a number of storage yards reaching full capacity.

“As such, we have been forced to temporarily curtail production at two of our five brick kilns across the state, representing 30 per cent of total production capacity,” CEO Lindsay Partridge said in the statement to the ASX.

Kilns at Punchbowl and Horsley Park Plant 3 were taken off-line over the weekend.

Plant 1 at Horsley Park, Bowral and the second kiln at Plant 3 remain operational.

“Whilst we have been forced to temporarily reduce staffing across several manufacturing facilities, we have no intention of laying off any staff, and are committed to working closely with our valued and highly skilled employees to preserve their employment throughout this period of uncertainty,” Mr Partridge said.

But they had impacted the company’s start to the new 2021-22 financial year.

“As our largest and most profitable market, the restrictions in New South Wales are now having a material impact on Building Products Australia earnings,” Mr Partridge said.

With the situation remaining highly volatile and unpredictable, it is difficult to quantify the ongoing impact and we have no confidence in being able to accurately forecast business performance until there is a full re-opening of construction activity across the state.”

The CEO said that earnings from its Australian building products business in 2020-21will still be 35% up on last year.

The company’s North American business traded slightly softer than forecast, and this will result in FY21 earnings being slightly below the prior year, in local currency terms (The company has already alluded to the weakness in the uS in an earlier update)

The property division will deliver a record EBIT result of around $250 million, near the middle of the range previously advised and this will push overall statutory earnings much higher than previously forecast.

In the statement Mr. Partridge also noted that major capital projects are being affected by the restrictions. “Our new masonry plant at Oakdale East has reached practical completion, however the commissioning process is being severely disrupted, with several critical technicians being stranded overseas, due to a scarcity of inbound flights, despite having been approved for travel to Australia.”

“Work on our new brick facility at Horsley Park, located in the Fairfield local council area, is currently stopped due to the ban on all construction activity in that area. If these bans are eased, our crews are on standby to re- commence work on this state significant project in whatever capacity allowed.”

“Development activity within the Property Trust has also been affected, with our various Oakdale Estates being impacted by numerous intermittent closures and reduced workforce numbers,” Mr. Partridge said.

He said business was still trading normally outside Sydney: “Despite the lock downs in Melbourne and Brisbane, demand in these cities remains largely unaffected at this stage. However, with the outlook across the entire country becoming increasingly uncertain, this could change at any moment.”

Brickworks again said that due to the lack of visibility of Investment earnings in the second half, which are driven by the company’s 39.4% shareholding in Washington H. Soul Pattinson, it was unable to provide net profit guidance for the year to July 31.

Brickworks’ full year results will be announced on September 23 (when Soul Patts figures will also be released).

Brickworks shares fell 1.5% to $24.79 on the news.

 

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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