The usual one cent a share lift in Brickworks' (ASX:BKW) interim dividend tells us the statutory and underlying losses for the six months to January 31 were just all numbers and accounting moves.
Brickworks’ real business of building materials production and sales in Australia (mostly in NSW and WA) and in parts of the US, the increasingly important property operations and its huge investment portfolio did well in the six months, notwithstanding the red ink.
Directors did warn of a softening in demand for bricks and tiles over the rest of 2023-24; it has started maintenance at some plants to cut production (and inventories), restructured other parts to save $15 million a year and cut 100 jobs.
Interim dividend is 24 cents a share, the tenth increase in a row and a record the company keeps producing half after half. A lurch into the red was not going to stop the rise.
Brickworks on Thursday revealed a Statutory Net Loss After Tax of $52 million for the January 31 half year while the Underlying Loss After Tax from continuing operations was $37 million.
"Earnings were adversely impacted by a non-cash property devaluation of $233 million (vs. $114 million gain in 1H23) and a $16 million loss on property sales (vs. $263 million profit in 1H23), as announced to the market on 22 December 2023."
Brickworks said its group Underlying Earnings Before Interest, Tax, Depreciation and Amortisation (‘EBITDA’) was a loss of $40 million for the half, compared to a gain of $607 million in the prior corresponding period.
Excluding the impact of the property revaluations and property sales, EBITDA was $210 million, down 9 per cent, which was reflective of the state of the building and property markets here and in the US.
The company said its building products EBITDA was higher in both Australia and North America.
"A period of significant investment and portfolio rationalisation has been completed over the past five years, and this is now supporting higher margins, despite the impact of inflationary pressures and lower building activity in some key markets.
Property earnings were lower, due primarily to the devaluations within the Property Trusts.
"Outside of this impact, it was another strong period of growth. Within the Industrial JV Trust, net trust income continued to increase, despite the impact of higher borrowing costs. .
And, although Investment earnings were lower, the market value of Brickworks’ listed investments increased by $140 million during the period, to $3.261 billion.
And CEO Lindsay Partridge was a bit more upbeat that he has been of late, saying in the statement that although "we continue to see a decline in building activity, performance within the Australian Building Products business was more resilient than expected in the first half."
"We are benefiting from a more focussed portfolio, following the exit of underperforming business units in recent years. A range of additional initiatives were implemented at the end of the first half to further streamline operations."
This included the consolidation of Austral Bricks and Austral Masonry into one operating division, a restructure of Bristile Roofing and a rationalisation of divisional support functions.
"In total, these initiatives are expected to deliver annualised savings of $15 million (from 2H24), through a reduction in headcount of approximately 100 staff.
"Despite the positive first half, order intake is softening, and we expect conditions to become more challenging for the remainder of FY24. In response to the short-term weakness, we are taking the opportunity to carry out maintenance activities at our plants, in preparation for the years ahead. "
