Brickworks sees sliding sales in Australia and US

The brickmaker has warned of worsening conditions in the US and Australia, but CEO Mark Ellenor believes the company has proved its credentials, including 48 years of maintaining or lifting its dividend to shareholders.

Brickworks is looking for a rebound in brick sales in the US and Australia in the new year. Picture: Colin Murty/The Australian

Brickworks chief executive Mark Ellenor believes worse-than-expected sales and earnings in the US are mostly the result of the cyclical slowdown in building activity around the presidential election, rather than any structural weakness in its business.

Softer sales in Australia were expected to eventually rebound as high demand for new housing was met, he said.

Mr Ellenor said Brickworks investors understood the strong credentials of the company, which apart from its building materials arm had a billion-dollar industrial property portfolio and a sizeable investment portfolio, with the company lifting its dividend for the last 11 years.

Speaking to The Australian after the Brickworks annual general meeting in Sydney on Tuesday, Mr Ellenor said despite weaker sales for its bricks in the US and Australia the company was strongly diversified to cope with volatile economic conditions, political cycles and the vagaries of property investment.

“Have a look at the dividend we have paid,” he said.

“It has increased 11 years in a row, and we haven’t missed one since we listed It just shows the strength of the diversification, and this is what we planned for.

“We’ve done everything that we can to get the cost out (of the business) and once we come out of it (The rise and fall of the building product cycle) we will be really strong. The underlying demand for housing is off the charts and once we go into a nice upturn it’ll be a pretty long cycle, in both countries.”

In his CEO address to shareholders, Mr Ellenor, who recently replaced veteran Brickworks boss Lindsay Partridge, revealed a disappointing trading update with sliding sales in Australia and a worse performance in the US than originally anticipated.

In its presentation to investors for the AGM, Mr Ellenor said in Australia first quarter revenue was down 5 per cent against the prior period, with profit margins “relatively stable” despite lower sales volume.

Brickworks is the biggest brickmaker in Australia.

He said after the meeting that the key markets of Victoria and NSW were “bottoming out”.

Brick sales to mid-level and high-rise constructions had been soft.

But there was more activity in parts of NSW, helped by new local planning rules, which should show up in sales in the new year, while civil construction for new train stations planned for western Sydney should also prove beneficial, he said.

However, in North America the decline in demand was greater than expected with first quarter revenue down by 12 per cent.

The company had temporary closed plants to undertake maintenance and control inventory, which has resulted in higher costs and reduced earnings margins.

“In North America, conditions have been more challenging, with the decline in demand greater than we anticipated,” Mr Ellenor said in his CEO address.

“The latest available building data indicates that the value of total construction work in our core regions was down by around 10 per cent in the first couple of months of fiscal 2025, compared to the same period in fiscal 2024.”

Mr Ellenor said it was typical for construction and building plans to be interrupted around election time.

“Everything really stops for the election, and given how most of our sales are into a lot of government work in particular, everyone just puts the brakes on over there,” he said.

“I think now the election is behind us, we’ll see a pick-up next year, and they’ve already had an interest-rate cut, so they might come out of the bottom before us.”

Shares in Brickworks initially rose more than 3 per cent on the release of the trading update.

They later eased to close up 0.23 per cent at $26.65, giving the company a market value of almost $4.1bn.