The impact of the federal government’s stimulus spending has shown up in a first quarter trading update by Brickworks. The country’s leading brick and tile maker.
It told shareholders at yesterday’s AGM that while first quarter sales in its Building Products Group increased by 2.7% compared to the prior quarter, first quarter earnings before interest and tax was $11.3 million (unaudited), an increase of 25.0% on the same period last year.
The company said in the trading update this was due to improved margins due to higher average selling prices and lower manufacturing costs.
"The Building Products Group, in particular Austral Bricks experienced initial signs of increased activity during November, with increased sales from the Building the Education Revolution and social housing programs.
"These programs will underpin construction activity through to 2011 by which time it is anticipated investors, as well as second and third home buyers will have returned to the housing market."
"Land and Development will provide a diversified earnings stream over the longer term; however it is anticipated that returns will be lower in the current year, the company said in a statement after the AGM.
"Returns from Brickworks’ Investments are expected to be solid once again this year.
"The special dividend and higher final dividend from Washington H. Soul Pattinson (WHSP) of $45.0 million will be received by Brickworks on 7 December 2009.
"The value of Brickworks’ shareholding in WHSP was $1.360 billion at 20 November 2009, an increase of 20.9% from $1.125 billion at 31 July 2009.
"With low gearing, a strong balance sheet as well as a diversified business model, Brickworks’ outlook for the coming year is for another solid result boosted by a recovery in Building Products and significantly lower borrowing costs."
Brickworks said the lower gearing followed the sharp fall in debt following the Share Purchase Plan.
"The Share Purchase Plan (SPP) that was announced in September 2009 resulted in shareholder acceptances totalling $174.4 million.
"These proceeds have been used to reduce net debt to $230.0 million and to further strengthen Brickworks’ balance sheet with Net Debt to Capital Employed now at 13.0%.
"The SPP also dramatically increased the number of shareholders that will in turn improve stock liquidity," the company said
It forecast "another solid result" for the 12 months to July 31, 2010, on the back of a record $113.7 million net profit in the previous fiscal year.
CEO Lindsay Partridge told the AGM that while the first home buyers’ scheme had helped boost demand, it was providing a slower boost than expected.
"While the First Home Owners Grant has been successful in providing a boost to building activity, high fall over rates prior to commencement combined with unusually long delays from enquiry to commencement stage have both limited and delayed its impact," he said.
"The increase in activity from the First Home Owners Grant at year end had not outweighed the absence of second and third home buyers as well as investors on the demand side.
"On the supply side there has been a complete lack of construction finance for medium density dwellings. In addition, a lack of finance for land development will further tighten land supply and availability."
The company’s shares were down 4 cents to $12.55 at the close yesterday.
