Similar results from linked Sydney-based companies, Washington H Soul Pattinson and Brickworks Ltd, thanks to their shared ownership of coal miner, New Hope.
Both reported very high first half profits, including one off items. The results from operations were more sedate and in the case of Brickworks, not all that flash as the housing downturn and property slump continues to bite that company.
Brickworks said first-half net profit jumped six-fold after the sale of a Queensland coal mining prospect, New Saraji, by New Hope, in which the company has a stake.
(We reported on the New Hope result earlier in the week.)
Brickworks said net profit hit $255.3 million for the six months to January 31, up from $40.3 million the year before, thanks to the one off profit impact from the coal deal.
Normalised profit, which reflects the day-to-day operations of the company, rose 26% to $50.8 million as returns from the company’s large investment portfolio more than offset weaker sales from its traditional building products and land development businesses.
"The diversified nature of the Brickworks group has proven its strength in this current economic downturn," Brickworks chairman Robert Millner said in the statement. (He’s also head of New Hope.)
"The strategic alliance with WHSP (Washington H Soul Pattinson & Co) has brought stability, diversity and reliable earnings to the company in these uncertain times."
Brickworks owns 43% in Washington H Soul, while Washington H Soul owns 49% of Brickworks.
Net profit was boosted by $204.5 million after the sale of New Saraji by New Hope, which is 61% owned by Washington H Soul Pattinson.
It sold the New Saraji mine in Queensland back to BHP Billion and its coal mining partner, Mitsubishi for $2.45 billion.
They operate as the BMA Alliance and sold the same prospect to New Hope a few years ago for a vastly lower price. The deal was done at the height of 2008’s coal mining mania.
Brickworks said yesterday revenue for the first half fell 9.8% to $275.3 million.
Earnings before interest and tax (EBIT) at Brickworks’ building products division fell 35% to $16.4 million as the weaker housing market again lowered sales volumes and returns.
The land and development division’s EBIT more than halved to $12.1 million, partly because of write-downs associated with the decline in property values.
EBIT excluding one-off gains from investments nearly tripled to $49 million, on a strong result from Washington H Soul.
The company declared a first-half dividend of 12.5c, fully franked, unchanged from the previous corresponding first half.
"Following the strong first half return from our Investments division we anticipate a record full year result, though Building Products and Property will be significantly down on last year," Mr Partridge said.
With that result in mind, the Washington H Soul Pattinson first-half profit was also up sharply.
The company said earnings hit $940 million for the six months to January 31, up from $45.4 million in the prior corresponding period.
Profit before one off items almost tripled to $117.5 million.
The company increased its first-half dividend to 13c a share, fully franked, from 12c the year before. That will of course benefit Brickworks and, indirectly, Washington H Soul Pattinson through their cross-holdings.
Soul Patts said the one off profit items included the $1.03 billion profit on the sale to BHP Billiton and Mitsubishi of the New Saraji coal project, and a $172 million impairment on investments in other associated companies.
"This is an exceptional result, driven principally by the New Hope profit from the sale of the New Saraji coal project and improved results in Pitt Capital Partners," Washington H chairman Robert Millner said in the statement.
Pitt Capital is an investment firm in which Washington H holds a 78.3% stake, which contributed $11 million to the group’s profit, compared with a $100,000 contribution the year before.
Washington H’s listed investment portfolio was valued at $2.8 billion as of January 31, compared with $2.4 billion the year before. The portfolio’s return was negative 20%, compared with the S&P/ASX 300 accumulation index’s return of negative 27%.
Soul Patts said other associated entities including Australian Pharmaceutical Industries Ltd, Clover Corporation, Ruralco Holdings and SP Telemedia all contributed to the profit.
Brickworks’ shares rose 5c to $9.60, Soul Patts’ shares jumped 34c, or 3.6% to $9.79
