Thursday, we learned about impairment losses from Brickworks and its 43% shareholder, Washington H Soul Pattinson, related to their brick-making and masonry businesses in Sydney and the U.S.
The surprise write-down announced on Thursday means Brickworks will report a loss for the fiscal year ending in June when it releases its full-year results later this month.
Brickworks, which also owns 26% of Soul Patts, informed the ASX that the slump in building activity in Australia and parts of the U.S. has necessitated these impairment losses ahead of its full-year results.
Brickworks will recognize a total non-cash impairment charge of $123.5 million on a post-tax basis. The pre-tax write-down is just over $172 million.
On an after-tax basis, a $54.7 million charge is being written off the value of the Austral business in southwest Sydney (78.1 million before tax), and a charge of $68.8 million is being made against Brickworks North America assets ($94.3 million before tax).
Brickworks attributed the impairment of the value of Austral to the deterioration in high-rise building activity during the second half of the company's financial year ending July 31.
This was particularly evident in its key markets of Sydney and Brisbane, as well as a delay in realizing benefits from a new plant due to scaled-back operations.
In the U.S., the impairment of its brick-making businesses was blamed on the sharp decline in homebuilding activity, which Brickworks says has weakened the short-to-medium-term outlook for non-residential buildings in key U.S. markets.
Brickworks reported a $52 million statutory loss for its first half.
The company stated that its earnings were adversely impacted by property sales and non-cash property revaluations, resulting in a loss of $249 million in the first half of 2024, compared to a profit of $376 million in the corresponding period of 2023.
Specifically, Brickworks said it had a non-cash property devaluation of $233 million (compared to a $114 million gain in the first half of 2023) and a $16 million loss on property sales (compared to a $263 million profit in the first half of 2023).
Group Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) was a loss of $40 million in the first half, compared to a gain of $607 million in the prior corresponding period.
Excluding the impact of property revaluations and sales, EBITDA was $210 million, down 9%, primarily due to a lower contribution from Investments.
These results suggest that the full-year results will be significantly in the red on a statutory profit basis after one-off items are taken into account, and pre-significant item results will also be challenging.
Brickworks will report its full-year results on September 26.
