Brickworks recovery fires up optimism
Price rises, property sales and efficiency gains helped the building products group Brickworks recover from last year's profit decline amid hopes of a continued recovery in underlying demand.
Brickworks has posted a year-to-July net profit of $100 million, from $78.9 million a year earlier. Revenue rose to $606.5 million, from $556.9 million.
The property division put in a stellar performance, with its contribution more than doubling to $49 million, from $16.4 million a year earlier.
Earnings a share rose to 57.6¢ from 29.4¢. A steady final dividend of 27¢ a share has been declared.
Housing starts nationwide remain mixed, with a strong performance in New South Wales offset by continued weakness in other states.
Overall starts of detached dwellings in Victoria fell another 10.6 per cent, it said, and were now down 29.2 per cent from the peak three years ago. Activity in NSW was more robust, with starts up 18.2 per cent, but with activity still below long-term levels.
Speculation of production over-capacity in the eastern states had been overplayed, it said.
"East coast production capacity is in balance," the managing director, Lindsay Partridge, said. "I don't think there is oversupply at all." There has been speculation that Boral and CSR may merge or swap some assets to reduce capacity, although Brickworks said it could idle some of its plant and refire it as conditions warranted.
Additionally, it gets some product from Adelaide Brighton in Victoria while supplying Adelaide Brighton in north Queensland.
Similarly, Brickworks supplies Boral in NSW, with Boral getting some product from CSR in Queensland. Price rises and production efficiencies more than offset the impact of the carbon tax on its building materials operations it said. In the year to July, 2014, property sales will be less important, with the continued focus on price rises along with production efficiencies, Mr Partridge said.