Shares in Australia’s biggest brick maker Brickworks jumped more than 6% yesterday despite a weak full-year result. Meanwhile, the weak performance by Round Oak Minerals saw Washington H Soul Pattinson, Brickworks’ major shareholder report a 7% decline in earnings for the year to the end of July.
A strong surge in the contribution from its property business allowed Brickworks Ltd, part of the Washington H Soul Pattinson Group of companies to report a solid improvement in interim net profit for the six months to January 31.
Building products group Brickworks’ full-year net profit has more than doubled to $186.2 million, helped by a land sale and increased investment earnings, but not so much its signature building products arm – its brick manufacturing operations.
Brickworks ((BKW)) is confident in the short-term outlook for building products, particularly on Australia’s east coast. Nevertheless, brokers consider the outlook becomes more uncertain as FY18 progresses, because of higher energy costs and slowing building activity.
Brickworks ((BKW)) has substantially upgraded its guidance for net profit in FY17, as a result of continued strength in its land & development portfolio. Building products on the east coast are also robust and holding strongly for now, although brokers suggest the headwinds may be mounting.
Citi notes Brickworks' FY19 performance beat the company's own guidance (4% growth versus flat guidance), broadly showing off the inherent resilience that stems from a diversified set of operations. Record earnings from the Property business helped, of course.
FY18 underlying net profit was ahead of expectations. Management has indicated residential activity is likely to decline in major east coast markets while energy prices will significantly affect earnings. A solid contribution from land and development is expected.