Swift building downturn ahead: Brickworks CEO

Australia’s largest brickmaker, Brickworks, says ‘significant disruption is inevitable’ in building, including housing.

“We are rapidly heading for a building downturn,” says Brickworks CEO Lindsay Partridge. Picture: Hollie Adams

Australia’s largest brickmaker, Brickworks, has warned of a rapid housing downturn and will consider halting its Australian manufacturing if the coronavirus pandemic continues to escalate, with its interim profit halved due to tough market conditions.

The building products maker said the health crisis was the worst in a century “with far reaching consequences that are difficult to predict” resulting in huge uncertainty for both Brickworks and the broader economy.

The company has withdrawn previous outlook statements and earnings guidance was also paused.

The downturn will be spread across different parts of its business including housing where it’s seeing reduced demand.

“We recognise that significant disruption is inevitable in the coming months.” Brickworks managing director Lindsay Partridge said.

“We are rapidly heading for a building downturn that will result in reduced demand for at least the remainder of the current financial year.

“Builders are reporting reduced activity at display homes and are imposing restrictions on the number of trades on site.”

Customer credit is also emerging as a risk with increasing debtor days and bad debts an issue for the industry.

Further lockdowns to contain the spread of the virus by state governments could also see it close production at its Australian plants to control stock and preserve cash.

“If the situation continues to escalate, we will not hesitate to cease manufacturing in order to protect the health and safety of our workforce,” Mr Partridge said.

Its building products division in North America has been significantly hit by the pandemic with the closure of five Pennsylvania brick plants, although its yards remain open for business.

European suppliers of imported products have also indicated operations have been suspended or will be shortly.

Brickworks’ half-year profit fell 49 per cent to $58m from $115m while its interim dividend increased 5 per cent to 20c a share.

Its building products Australian unit saw earnings before interest and tax plummet 62 per cent to $10m due to a sharp slowdown in building activity across Australia, particularly apartment construction in NSW and Queensland.

Residential starts declined by 24 per cent to 89,000 for the six months to September 2019, according to the Australian Bureau of Statistics led by declines in NSW and Queensland.