The annual results from linked companies Brickworks and Washington H Soul Pattinson, have once again revealed the perils of interlinked groups when earnings slide, or when a big one off profit is no longer in the equation.
Brickworks said yesterday its 2010 profit halved to $138.79 million for the 12 months to July 31.
That was down 55% from $305.215 million in the prior year.
The result was affected by Brickworks’ 42.8% shareholding in Washington H Soul Pattinson & Co Ltd, which reported an 80% drop in net profit to $218.327 million.
(Soul Patts owns around 48% of Brickworks.)
That was because of a capital profit of just over $1 billion was taken by associate, New Hope, from the sale of the Sariji coking coal prospect in Queensland in the 2009 financial year.
2011 will see a large (but substantially smaller) profit for Soul Patts via New Hope from the sale in Arrow Energy to Shell.
Brickworks said the net profit excluding one-off items was down 3.1% at $110.18 million.
The company declared a final dividend of 27c fully franked, taking the full year dividend to 40c fully franked, an increase of one cent on 2009.
The increase came from an 11% rise in revenues to $656.54 million
Earnings before interest and tax (EBIT) jumped 44% to $53.4 million, with much of that coming from a 45% surge in second half EBIT to more than $31 million.
Brickworks said it expects to post another "solid result" in the coming year, despite a short-term softening in the demand for housing.
"The outlook for building products in the long term is positive, however in the short term demand is softening as the government stimulus work subsides," the company said yesterday.
"The markets in the resource states of Queensland and Western Australia are the greatest concern due to high rental vacancy rates and poor affordability."
Industrial and commercial construction markets appear to be running a similar path to the housing markets in each state, Brickworks said.
"Non-residential construction is expected to start recovering during the coming financial year."
Brickworks said it had increased its exposure to commercial and industrial construction with the acquisition of Girotto and Gocrete for $13.8 million last month and Sasso Precast Concrete in March.
Brickworks says the market value of its shareholding in Washington H. Soul Pattinson grew by $204 million to $1.329 billion for the year ended July 31, 2010.
Meanwhile ignoring the 80% fall in declared profit for Washington H Soul Pattinson and Company Ltd (WHSP) reveals that operating net profit for the year to July 31 before one off items was $181.6 million, down from the $224.7 million earned in 2009.
The company said yesterday in a filing with the ASX that earnings including one off items in 2010 were $218.3 million, against the record $1.12 billion in the previous corresponding period.
The previous year’s results included a one-off benefit of $1.03 billion from the sale of New Hope Corporation (59.9% owned) Saraji coking coal prospect in Queensland.
New Hope earlier this week reported lower earnings from its operating businesses because of sharply lower coal returns caused by a fall in prices for most of the year and the stronger Australian dollar
The decrease was primarily due to lower contributions from New Hope and Pitt Capital Partners, of which it owns 79%, after particularly strong results in the previous year.
"The company said the market value of its listed investment portfolio, which includes controlled entities and associates, was $4.07 billion as at 31 July 2010, compared to $4.04 billion as at 31 July 2009.
"Excluding controlled entities and associates, the market value of the listed investment portfolio as at 31 July 2010 was $459 million, an increase of 15.9% when compared to $396 million at 31 July 2009.
"During the year $110.8 million was invested in listed equities, with purchases including Australian Pharmaceutical Industries Limited, Commonwealth Bank of Australia, Quickstep Holdings Limited, Telstra Corporation Limited and TPG Telecom Limited. Purchases of shares in controlled entities and associates totalled $43 million."
A fully franked final dividend of 20c was declared, up from 19c in the previous year, plus a special fully franked dividend of 12.5c per share.
Soul Patts shares eased 13c, or around 1% to $13.20 yesterday. Brickworks shares were off 25c, or 2%, at $11.90.
