The Brickworks Limited (ASX: BKW) share price has risen 8% after reporting its FY24 result.
Brickworks produces various building products including bricks, paving, masonry, roofing and more. It also owns shares of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and various property assets, including half of a large industrial property portfolio.
FY24 result
Here are some of the highlights from the Brickworks result for the 12 months to 31 July 2024:
- Underlying EBITDA declined 80% to $157 million
- Underlying net profit after tax (NPAT) declined 88% to $61 million
- Statutory NPAT sank 130% to $119 million
- Final dividend up 2% to $0.43 per share
- Full-year dividend up 3.1% to $0.67 per share
The company revealed that its Australian building products business grew underlying EBITDA by 2% to $102 million and the North American building products segment grew underlying EBITDA by 9% to $43 million. There were also impairments recently announced.
Lower building activity resulted in the company scaling back production to control its inventory, and profit margins improved across most of its businesses. The commissioning of the new brick plant at Horsley Park was substantially completed in the second half. Both the Australian and US businesses reduced their staff headcount.
Looking at the property division, rental income increased by 9% to $163 million thanks to contracted increases and new developments, partly offset by the M7 estate sale. However, net trust income declined 1% to $98 million because of a 30% rise in borrowing costs. It reported a $75 million development profit.
However, the property trust suffered a $215 million accounting loss relating to property trust revaluations, compared to a $112 million positive figure in FY23.
Brickworks reported that its net value of property trust assets decreased by $267 million (or 12% in percentage terms) during the year, with development profits more than offset by the M7 estate sale and the property devaluation.
Brickworks’ market value of its investments saw an 8% increased to $3.38 billion, while the ordinary dividends received increased 15% to $86 million.
Outlook for the Brickworks share price
The company has plenty of growth potential, in my opinion. A rebound of building product demand would be helpful.
Brickworks outlined how the property trust’s current passing rent is $180 million, while the market rent for those properties is approximately $251 million, implying an uplift of close to 40%, though it may take a number of years to realise this increase. There are also multiple developments being worked on, which could add another $90 million of rent. Overall, there is scope for the property trust to see rental growth of around 90% over the long-term.
Combined with the ownership of WHSP shares, which I view as an excellent business, I think Brickworks has a very promising future.
