Profit up at Brickworks, profit down at Washington H Soul Pattinson, once you strip out the distorting impact of the cross shareholdings in each other, and yet another big one-off profit.
Soul Patts owns 44% of Brickworks (which controls 42% of Soul Patts) as well as coal miner, New Hope (lower interim, as reported earlier in the week), telco, TPG, (up), Australian Pharmaceutical Industries, Clover Corp and RuralCo (all up).
Soul Patts’ interim profit fell 10% (excluding the big profit on the sale by New Hope, of shares in Arrow Energy) to $87.1 million, while Brickworks lifted net earnings 7% to $60.9 million, despite a patchy building sector.
Brickworks had to contend with wet weather over the last six months and weak trading conditions in both Western Australia and Queensland in January and February, which offset some of the boom-like conditions in Victoria (and to a lesser extent in NSW).
In fact Brickworks is a far more important company than Soul Patts is when it comes to looking at the impact of economic changes.
Brickworks said in its filing yesterday that the outlook for housing construction is patchy but it will continue at current levels for the coming year.
Net profit from all sources was $117.058 million for the six months to January 31, up from $88.2 million in the prior corresponding period.
Revenue rose 2.7% to $327.7 million in the first half of 2010-11, which reflected the patchy conditions in the building sector.
Brickworks said the building products division earnings rose only marginally to $22.4 million, after the wettest six months on record led to significant construction delays on the east coast, and cost around $1.7 million in earnings.
The company expects home building to stabilise at around 150,000 to 155,000 for the coming year, barring any further interest rate rises, and will vary from state to state.
‘‘While Victoria continues to experience record activity levels, Queensland commencements have fallen to levels experienced at the bottom of the cycle,’’ the company said yesterday.
‘‘There is a significant housing shortage in New South Wales and a change in government may result in policy changes to address the land supply and affordability constraints.’’
Brickworks says any demand in Queensland driven by rebuilding after the recent floods and cyclone will take at least 12 months to flow through.
The company’s precast business is expected to make an improved contribution in the second half, as the outlook for the commercial and industrial markets improve over the coming year.
Brickworks CEO Lindsay Partridge said: “The Gillard government’s proposed carbon tax has the potential to cause long-term damage to the housing and building products industries in Australia.
"The price of building products will rise under this scheme, negatively impacting housing affordability throughout Australia at a time when it is already unaffordable and construction levels are below underlying demand.
“The end result will be an exodus of manufacturing industries and investment offshore, jobs will be lost, the cost of housing will increase and there will be no change to carbon emissions. The sooner the current plan is abandoned the better.
“A change in government in New South Wales will result in a policy change to address land supply constraints and allow house construction in New South Wales to return to more normal levels.
"There is evidence of an emerging recovery in medium density building especially in New South Wales and Victoria.
‘‘It is anticipated that WHSP’s full year result will be negatively impacted by the recent Queensland floods.
"Brickworks expects to deliver a solid full year result," he said.
Brickworks also said profit from non-regular items was $56.1 million for the period, consisting primarily of the equity accounted profit before tax from Soul Patts in the half year.
Brickworks lifted dividend to 13.5c from the previous 13c a share. The company’s shares rose 19c or 1.8% to $10.89.
For Soul Patts it was a different year, big headline result, lower real or operating profit, before the New Hope contribution from the Arrow sale.
Including that, Soul Patts said in their ASX statement yesterday that net profit more than doubled thanks to the sale of the stake in Arrow Energy.
Net profit rose to $284.91 million for the six months to January 31, 2011, from $123.41 million a year earlier.
But profit before non-regular items fell 10.3% to $87.1 million, mainly because New Hope’s operating result declined on a stronger Australian dollar, increased transport costs and wet weather.
Soul Patts owns nearly 60% of New Hope, which reported its results on Tuesday.
Washington H chairman Robert Millner said it was a pleasing result.
"The group has a robust balance sheet with cash reserves of $2.24 billion and we do not have any external borrowings from financial institutions," he said in the statement.
"While this puts us in an excellent position to pursue available investment opportunities, the current
