First it was Boral (BLD) with its interim profit, revealing a sharp improvement as the local building boom kicked in – next week it will be CSR no doubt reporting signs of life.
And yesterday it was Brickworks (BKW) which confirmed the positive impact of the gathering home building boom which the Reserve Bank and Governor Glenn Stevens have been talking up, arrived in its 2013-14 interim figures.
In fact it was the strong performance from its building products division which helped Brickworks offset declines in its property and investment arms to post a steady interim profit.
And, the company said that full year earnings "will comfortably exceed" the 2012-13 results – a real upgrade if ever there was one.
In the year to July 2013 Brickworks’ net profit was $85.2 million, with analysts now expecting a profit of around $105-110 million for the 2014 year.
The net profit of $56.3 million for the six months to the end of January was earned on revenue of $325.6 million, up from $311.3 million previously.
The interim dividend was raised to 14c from 13.5c on earnings a share of 36.1c down from 37.9c.
Brickworks shares ended up 0.7% on $14.22 in yesterday’s weak market, which wasn’t a bad outcome.
BKW 1Y – Brickworks aiming at boosting earnings from building
That’s a bit on the parsimonious side given its well under a 50% payout rate, which would see the dividend rise to around 18c a share, and leave plenty in the till for the company to finance its expansion.
Earnings before interest and tax (EBIT) from the building products arm rose 37% to $19.2 million; EBIT from land and development eased to just over $36 million from more than $37 million and earnings from associated companies (such as Soul Patts) fell 17.8% to $23.7 million.
The result included one-off gains related to its major stake in investment firm Washington H Soul Pattison, and with those items excluded Brickworks’ profit eased 4.5% from the previous corresponding period. That was due to lower earnings from its land and development operations, and its investment in Soul Pattison.
Victoria is continuing to suffer from a "major decline" in starts of detached housing, Brickworks said, with activity at record levels in Western Australia and firm in most other markets. In NSW most activity is in the high rise sector, directors said, supporting data from the Bureau of Statistics and the Reserve Bank.
The slow recovery in building products demand is now behind it, with volume demand at its Austral Bricks unit ahead 30% in March, year on year, it said. "Significantly higher earnings" are expected from the building products division in the second half, Brickworks said.
Overall, full year earnings will "comfortably exceed" the year earlier figures, it said.
The performance of the building products business will be vital and the company said it´s already seeing a solid rise in demand for bricks.
"We are now experiencing a more broad based recovery in demand, with Austral Bricks sales volumes in March tracking more than 30% ahead of the prior year, building on momentum from February.
"If demand continues to build and stock holdings fall to unsustainable levels, Brickworks is well placed, with the flexibility to bring on kilns currently mothballed such as Plant 2 at Horsley Park and the second kilns at Rochedale and Golden Grove," the company said in yesterday’s statement.
"However the Building Products Group remains committed to increasing profit, as opposed to market share. Price rises have been implemented by a number of divisions in the first half, with the full impact of these increases yet to be realised. Over the remainder of the year, all divisions will continue to implement price rises as and when necessary to ensure margins and returns reach acceptable levels."
"If sales momentum is sustained, the Building Products Group is well placed to deliver significantly higher earnings in the second half, compared to the previous corresponding period. Final quarter earnings will also benefit from the completion of major capital projects such as the refit of the Bellevue brick plant in Western Australia and the automated mesh welding machine at the Wetherill Park precast facility in New South Wales," directors added.
