Australia’s biggest brick maker, Brickworks (BKW) has rejected claims from some in the building industry that the home building and apartment boom in the eastern states is nearing a peak, with a big drop to follow.
Residential building activity for both housing and apartments, flats and units hit all time highs in the year to June, according to Brickworks annual profit report yesterday.
Some in the housing and building sectors are getting worried that slowing auction clearance rates in Sydney and Melbourne are signalling a slowdown as more and more properties come onto the market this spring and early summer.
Boral (BLD) CEO Mike Kane is one calling a downturn – he made the equally valid point that the home building industry is at a peak and can only go one way.
Brickworks managing director Lindsay Partridge said yesterday orders for for his building products business are still solid.
"In Austral bricks, the current order bank along the east coast is extremely strong. Home builders in the major markets of Sydney and Melbourne are reporting strong demand and work in hand extending by up to one year,” he said.
He urged state and territory governments to do more to overcome land title bottlenecks, delays in building approvals and trade shortages.
Brickworks said that total dwelling commencements for Australia were up 15.8% to 209,601 for the twelve months ended 30 June 2015. “This level of residential building activity is the highest on record in Australia, with detached housing activity now three years into a recovery and other residential commencements continuing to record unprecedented growth,” the company said yesterday.
"Detached housing commencements increased 9.3% on the prior year. The growth in detached housing was broad-based, with all states except South Australia experiencing improved conditions. Following three years of growth, the level of detached house building now exceeds the 25 year average by 10%, but remains 14% below the record level.
"Momentum in other residential activity continued unabated, with commencements up a further 24.7% to a new record high of 95,485 for the twelve months to 30 June 2015. This level of other residential activity is 85% higher than the 25 year average and more than double the levels recorded six years ago.
“Other residential developments now represent 45.6% of all residential commencements in Australia, up from 20.9% six years ago,” the company added.
For the year ended 31 July Brickworks reported an 8% rise in revenue to $723.6 million.
Excluding $49.5 million worth of impairments, Brickworks said underlying profit for 2014-15 jumped nearly 19% to $120.3 million.
The property development, investment, and building products group booked impairments against goodwill in Austral Precast, log licenses owned by Auswest Timbers, and $25.1 million of charges relating to Washington H. Soul Pattinson.
The impairments dragged its full-year profit down 24% to just $78.1 million.
Robert Millner, who chairs both Brickworks and Soul Patts, said that he expects interest rates to stay low "for a long time".
"Which means it is a good time to invest in real assets," he said.
Brickworks shares were down 13 cents to $15.24.
BKW 1Y – Brickworks sees ‘momentum’ in building activity
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Brickworks declared a final dividend of 30 cents, up from 28 cents, for a final for the year of 45 cents, up 7.1% from the 42 cents paid for 2013-14.
Looking at Brickwork’s performance, its building products division saw underlying earnings before interest and tax (‘EBIT’) jumped 25% to $56.4 million, from the prior year. "The improved earnings were driven by a combination of continued sales growth and solid price increases in some divisions,“ the company said yesterday.
The land and development division’s EBIT was $64.4 million for the 12 months to July, ”driven primarily by a strong revaluation profit in the Joint Venture Industrial Property Trust (‘Property Trust’) and the sale of the Coles Chilled Distribution Centre (‘Coles CDC’)”, according to the company.
And investment EBIT, including the underlying contribution from Washington H Soul Pattinson, was up 22.9% to $54.8 million. This was due primarily to increased underlying earnings in TPG Telecom.
