Brickworks boss says shortages in trades and construction workers could threaten new housing starts

The ‘crippling’ labour shortage, particularly construction workers, threatens Australia’s capacity to build new homes, warns Brickworks boss.

Brickworks CEO Lindsay Partridge has warned of crippling labour shortages, which are forcing many of his factories to run at well below capacity. Picture: Hollie Adams/The Australian

Australia’s biggest brickmaker Brickworks has warned crippling labour shortages are forcing the nation’s manufacturing plants to run well below capacity and said the Reserve Bank of Australia should now pause interest rate hikes amid uncertainty in the economy.

Chief executive Lindsay Partridge said a lack of construction workers - such as bricklayers and roof tilers - will threaten the country’s capacity to build new homes and ease the housing shortage.

Mr Partridge said labour shortages in Australia and the US were now critical and were having an impact on his business and would soon flow through to the housing market as it put a handbrake on the ability to build new homes.

“We are running at about 60 vacancies in Australia out of 1200 workers and in America we’ve got 50 vacancies in 1000. So it’s absolutely crippling, the labour shortage is crippling, and particularly the trade shortage is making it very difficult to maintain our plants in a couple of places,” he said.

“We are having enormous difficulty keeping our plants online because we can’t get electricians and fitters to maintain those plants. And to give you some idea, an electrician or a fitter that you might have been paying $30 an hour for two years ago, we are now paying $90 an hour.”

The Brickworks boss also said the RBA should now pause before further pushing up interest rates to assess the impact on the broader economy after ten successive hikes.

“Interest rates were too low for too long, and they have come up too fast ... and that takes time to work through the economy,” Mr Partridge told The Australian.

“There is a lag, and if they weren’t so low they wouldn‘t have had to push it so hard, they are in no-man’s land and I wouldn’t be sleeping at night if I was the RBA governor.”

Brickworks also pointed to a cost slug from huge energy cost increases such as a 100 per cent jump in its electricity bill and elevated prices for raw materials that go into its bricks and tiles.

Mr Partridge said he hoped labour shortages would end over the next three years, helping to lift construction rates, but still sees problems hitting new build targets.

“I think both shortages (trades for his plants and construction workers) needs the government to review its immigration policies, there is no use importing IT people and nurses and doctors if they have got nowhere to live. We need tradespeople to build the houses for these people to live, and the government can’t think about building 30,000 social houses if they haven’t got the trades lined up to build those houses.”

It comes as his building products operations were also struggling to pass on the full cost of inflation to customers, although Brickworks had lifted its prices to counter the inflationary pressures and was now in the process of lifting prices again for its bricks and tiles by around 7 per cent.

“There are significant cost increases, sand and gravel and basic things like that, cement, have all gone up, oxides and glazes have gone up significantly. And that’s affecting our cost of production. Electricity for us is up 100 per cent this calendar year, and that’s obviously now feeding into our production costs as well.”

The brick maker on Thursday unveiled a near 14 per cent rise in half-year revenue to $583.9m as reported net profit dropped 38 per cent to $354.4m. The drop in net profit was mostly driven by the impact of the merger between investment company Washington H. Soul Pattinson - which Brickworks is a major shareholder in - and fellow investment company Milton Corporation. The first half results were also dented by a $32m impairment to Brickworks’s Austral Bricks arm in Western Australia.

Earnings from its Australian buildings products arm fell, despite an 11 per cent lift in sales, as higher interest rates and a reduction in the backlog of work from the government’s HomeBuilder program saw a fall in new housing construction.

Underlying net profit from continuing operations before significant items, rose 24 per cent to a record $410m.

Brickworks declared an interim dividend of 23c a share, up 1c, and payable on May 2. It extends Brickworks’s 47-year record of maintaining or increasing dividends.

The market welcomed the stronger underlying earnings and higher dividend, sending Brickworks shares rose 5.2 per cent before closing up 72, or 3.12 per cent, at $23.76. Its stablemate investor company Soul Pattinson also reported its results on Thursday and unveiled a 24.1 per cent hike in its own interim dividend, the biggest slice of which will flow to Brickworks’s bank account in mid May.

For the first half, Brickworks’s key Australian building products arm posted sales revenue of $364m, up 11 per cent, but earnings fell 6 per cent on the previous corresponding period. The decrease in earnings was primarily due to a decline in Bristile Roofing and Austral Bricks in Western Australia, with most other business units recording improved earnings.

Its building products North America business delivered an 18 per cent increase in revenue, to $220m, driven by increased sales to the multi-residential market and the continued growth of retail operations. Earnings jumped 16 per cent to $14m, despite the ongoing impact of cost inflation and labour shortages across many operations.

For its property arm, which includes industrial property holdings and a joint venture with Goodman Group, earnings hit a record $453m, up 26 per cent. During the period, Brickworks’s share of the net asset value within its Property Trusts increased by a further $484m, and now stands at $2.238bn. The $301m sale of south west Sydney’s Oakdale East Stage 2 development into the Industrial JV Trust delivered earnings of $263m, after taking into account the book value, rehabilitation provisions and transaction costs. A development profit of $54m was also recorded, following the completion of new facilities at the Oakdale West Estate during the period.

Brickworks’ investment portfolio earnings soared 37 per cent to $100m as it benefited from improved performances from its key investment in Soul Pattinson and New Hope Coal.