Brickworks’ Australian business in growth mode as US arm takes COVID hit

Building materials supplier forced to slow down operations in some of its US plants as its staff battle COVID-19.

Brickworks managing director Lindsay Partridge. Hollie Adams/The Australian

The COVID-19 pandemic has hit Brickworks’ US division, forcing the building materials supplier to slow down operations in some of its plants as its staff battle the virus and the business struggles to source alternative employees.

“We have 750 staff in the US and rigorous COVID-19 testing before everyone comes to work. I currently have 50 staff absent and of those 50, 20 have Covid and two are in hospital,” Brickworks managing director Lindsay Partridge told The Australian.

“We are extremely concerned about the health and wellbeing of our employees but it’s also impacted our ability to operate. A couple of our plants have had to slow down because we can’t field a full crew to run them. There’s labour shortages in a number of states so we have no choice.”

Mr Partridge expects the deliberate slowdown to continue until a vaccine comes through.

“At the moment it’s having a relatively minor impact (on the division’s profits), but if it gets much worse it’s going to be a problem,” he warned.

A slowdown in non-residential construction activity in the US had also seen sales fall below expectations, Mr Partridge said.

“The impact of the pandemic, including the deferral of many projects by state authorities due to financing concerns, and the uncertainty in relation to the recent Presidential election, have combined to cause a slowdown in non-residential construction activity,” he said.

“There still remains significant uncertainty in this market, with the current surge in infections across many parts of the US causing ongoing disruptions to sales activity and manufacturing operations.”

Despite the short-term hit, Mr Partridge said he was pleased with the US division’s underlying performance and the progress achieved against its strategic priorities in recent years. The company’s growth strategy in the region was still on track, he told shareholders.

“We are confident that once conditions normalise, our North American operations will deliver improved earnings and growth for many years to come,” he said.

As the US operations battle through the COVID-19 crisis, its local business had a “strong” first quarter, outpacing the prior corresponding period, the building materials supplier told shareholders on Tuesday.

In a trading update issued hours before its annual meeting, Brickworks said its Australian home building customers had a solid pipeline of work in place for the remainder of the financial year, underpinned by government stimulus measures.

The underperformance in the US contrasted with the local business, with the company accelerating several growth initiatives in recent months, Mr Partridge said.

“Last month we held B20, the biggest product launch event in our company’s history, introducing an exciting range of innovative new bricks, roof tiles and masonry products to the market.”

“We are also in the midst of a significant capital program that will strengthen our competitive position in a number of key markets. Following the completion of the Southern Cross Cement terminal in 2020, construction of our $75m Austral Masonry plant in Sydney is well on track for commissioning in 2021.”

But major projects across the country had been delayed by extended state border closures which had restricted the movement of engineering crews and technical staff, he warned.

Trading conditions in WA continued to be difficult, he said.

Another strong half is expected for the property business, he predicted, as he told shareholders development activity had continued “at an unprecedented scale”.

“The COVID-19 pandemic has only accelerated industry trends towards online shopping, and this is fuelling demand for the company’s prime industrial property.

“Interest from potential new tenants is strong, with discussions well underway with several parties in relation to additional leasing opportunities within the property trust,” he said.

Brickworks has a 50-50 property trust joint venture with the Goodman Group and is currently constructing an a facility in Sydney for online giant Amazon. It is due for completion by September next year, he said.

Washington H. Soul Pattinson will also deliver a stable stream of earnings and dividends over the long term, Mr Partridge added. Brickworks has held a cross-shareholding with Washington H. Soul Pattinson since 1969.

Brickworks will on Wednesday pay out a final dividend of 39c per share, bringing its total full-year dividend to 59c.

“In the current environment of global uncertainty and record low interest rates, we recognise that a reliable source of income is more important than ever to our shareholders,” chairman Robert Millner said.

“Our ability to once again increase dividends is testament to our strong financial position, prudent capital management and our diversified business model.”

Brickworks shares finished Tuesday’s session up 4 per cent at $19.48.