Brickworks books flat profit as WA impairments weigh

Profit growth has stalled as the country’s largest brick manufacturer, as impairments at its WA operations weigh heavy.

Brickworks managing director Lindsay Partridge. (Adam Yip/The Australian)

Brickworks has reported a flat profit in fiscal 2016 owing to impairments at its under-pressure Western Australia operations.

Australia’s largest manufacturer of bricks (BKW) said its net profit inched up 0.1 per cent to $78.2 million in the year to July 31, despite a robust 3.8 per cent lift in revenue to $751m.

The result was adversely affected by $68.9m worth of impairments, with $47.3m linked to a writedown of its Austral Bricks Western Australia unit.

After stripping out the impact of the impairments, Brickworks logged a 22.3 per cent surge in underlying earnings to $147.1m.

“For the second consecutive year, Building Products, Land and Development and Investments each recorded an uplift in underlying earnings,” chairman Robert Millner said of the group’s respective units.

“Together with an almost $400m increase in the market value of Investments, the group has generated significant growth in value for shareholders in 2016.”

Brickworks managing director Lindsay Partridge said conditions for its core building products division looked promising for fiscal 2017 due to an ongoing housing boom up and down the east coast.

“The short-term outlook remains positive, with a full order book and a long pipeline of work at higher margins in our major east coast markets set to support earnings in 2017,” he said.

The optimism was kept in check by weakness in the WA housing market however, which has forced the group to prioritise a restructure of its operations.

“Despite the current cyclical downturn, Western Australia has a strong and entrenched tradition of brick usage, with sales per capita being more than three times any other state in Australia,” he said.

“This is a very attractive market to Brickworks. As such we are making the necessary investments to upgrade our facilities and rationalise our brick operations in that state, starting with an upgrade to the Cardup brick plant.

“Completion of this project will be a key focus in the first half of financial year 2017.”

Brickworks declared a final dividend of 32 cents a share, up 2c on the corresponding number last year.