The Brickworks Limited (ASX: BKW) share price is on watch this morning after the construction business reported its FY21 half-year result.
Brickworks reports HY21 result
Total revenue fell 4% to $432 million, with underlying EBITDA (EBITDA explained) falling 4% to $163 million and underlying EBIT dropping 6% to $127 million.
Underlying net profit fell 10% to $90 million, whilst statutory net profit increased 22% to $71 million.
However, there were different performances within those numbers.
Building products Australia
The Australian building products division experienced a 60% jump in EBIT to $16 million, whilst EBITDA came in at $43 million. Brickworks explained that the higher earnings were due to a broad-based reduction in operating costs, supporting improved margins across all business units and regions.
Brickworks also benefited from government stimulus packages throughout the period, leading to higher consumer confidence, greater building activity and larger demand for building products. It has re-started its mothballed brick kiln at plant 3 in NSW and all east coast brick, roof tile and masonry plants are now operating at capacity.
The building products business also said that the performance of its bricks business in Queensland was particularly strong, with the business returning to a market leading position following plant upgrades.
Brickworks expects an elevated period of activity for at least a year, partly due to limited availability of tradespeople. But it said that significant uncertainty remains about the longer term after stimulus ends.
Building products US
There was a 33% decrease of EBIT to $4 million, with EBITDA of $13 million.
Building activity in Glen Gery’s key non-residential markets was significantly lower due to the pandemic and the uncertainty relating to the US election.
Brickworks said it had struggled to keep some plants operating with more than half of all staff unable to work at various times during the half-year period.
However, the company is pleased with the progress made against strategic priorities.
In North America, it has seen a strong recovery of demand during March, improved weather and increased optimism about a stimulus led recovery. Daily order intake is back to pre-pandemic levels.
Management are confident this division will deliver improved earnings and growth for many years.
Property division
The property division delivered EBIT of $92 million, mainly due to the joint venture with Goodman Group (ASX: GMG).
It said that industrial property had been particularly resilient through the pandemic. Net trust income increased by 7% to $16 million.
The property trust assets were revalued during the half and resulted in a strong revaluation profit of $40 million. It also saw a land sale profit of $38 million, primarily relating to the recognition of previously unrealised profits with the Oakdale West land sale after lease agreements with Coles Group Ltd (ASX: COL) and Amazon.
Total assets within the property trust now stands at almost $2.2 billion. After including debt, Brickworks’ share of net assets was $777 million.
It said that the Amazon facility is due to be completed in September.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Brickworks said that its stake of WHSP increased by $720 million during the half.
However, the WHSP EBIT was down 36% to $25 million and Brickworks recognised a $6 million cost in relation to WHSP’s significant items, as well as a $3 million tax cost arising from the carrying value of WHSP.
You can check out the full WHSP result on Rask Media later.
Brickworks Dividend
Brickworks increased its dividend by 5 cents to 21 cents per share.
Summary thoughts
As mentioned in my preview article about Brickworks, I was looking for a few different things.
There were bullish comments about the US economy and construction industry- that’s good news. It was also good to hear that the Australian building products division is performing well and at least the next 12 months looks good. However, it’s interesting that management talked of uncertainty in the medium term for Australia.
The construction of the Amazon facility is on track and it will be a good boost when it’s completed. This should boost the underlying value of Brickworks.
With an asset backing of above $27 per share, I think Brickworks could be a solid long-term buy, particularly for income with a fully franked dividend yield of 3.2%.
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