Brickworks has slumped to a large loss as property and building sectors suffer

Some of the lowest levels of building activity in decades has pushed Brickworks to a $118.9m loss — although the company still managed to up its dividend.

The boss of the nation’s largest brickmaker, Brickworks, believes the sclerotic housing sector is in the depths of its worst slowdown in decades but can climb out of the hole it is in if governments free up land to stimulate construction and slash costs to alleviate the cost of buying a home.

Recently appointed Brickworks chief executive Mark Ellenor said the housing construction sector was “at the bottom”, with some early signs of recovery in Queensland but “absolutely no sign of things improving” in the company’s core markets of NSW and Victoria.

“I think it’s going to be subdued for some time,” he said. “I really think the next calendar year will be tough.”

Mr Ellenor, who replaced former long-serving CEO Lindsay Partridge as boss of the $4.36bn bricks, building materials and diversified investor, said housing was a key election issue and to kickstart housing more land had to be opened up to development.

“I just think there is not enough land on the market, we need to release 40,000, 50,000 blocks of land, but then you have tax on the land as well,” he told The Australian after Brickworks reported it had slumped to a full-year net loss of $118.9m as massive impairments to its property portfolio and the impact of the slow housing market plunged the company’s bottom line deep into the red.

“And then in southwest Sydney a house-and-land package is between $850,000 and $1m for a first-home buyer, and they need a $200,000 deposit, combined income and seven years to save up for it, and it is just unaffordable.”

Australia’s sharp slowdown in building activity, combined with intense competition in the US where it is one of the region’s fourth-largest brick maker, has forced hundreds of millions of dollars of impairments on to the 94-year-old Brickworks.

Despite this – and bolstered by its large investment portfolio – Brickworks still managed to up its final dividend.

Brickworks’s net loss of $118.9m for the financial year to July 31 is its first loss in decades, and a swing from a profit of $394.7m in 2023.

Revenue for the period fell 7.8 per cent to $1.1bn.

The company hopes, however, that its diversification into industrial property and listed investments will bolster its returns in the next few years as it awaits a rebound in the construction sector.

A stablemate of investment group Washington H Soul Pattinson with a stake of 25.7 per cent, Brickworks has decided to temporarily shut some of its building materials plants amid the downturn, but is hopeful that the boom in e-commerce will continue to drive demand for its industrial property assets which service the digital economy.

The outlook for its building materials arms – in Australia and the US – was more bearish due to subdued building activity across key markets, with Brickworks deciding to temporarily close some of its plants through 2025.

Despite the loss, it was better than the market expected, and shares in Brickworks rallied 7.2 per cent to close at $28.52 on Thursday.

Brickworks is Australia’s biggest brickmaker and one of the largest in North America.

The company lifted its final dividend to 43c per share, up from 42c, payable on November 27.

Brickworks said its 2024 earnings were hit by property sales and non-cash property revaluations, with a loss of $231m in 2024 compared to a profit of $381m in 2023, and impairments to its building products arm of $135m.

Two weeks ago, Brickworks warned it would need to book a pre-tax impairment of $172.4m against its masonry and North American bricks businesses due to a slowdown in building activity, delays in the realisation of increased investments in its Austral Masonry arm, higher costs and strong competition in the US bricks market.

It pointed to accelerated deterioration in multi-residential building activity in the second half of fiscal 2024, with June commencements across Australia forecast to be at the lowest level for more than a decade.

The decline has been particularly severe in the high-rise segment (four-plus storeys) in Sydney and Brisbane, key markets for Austral Masonry.

Earnings for its Australian building products arm in fiscal 2024 rose 2 per cent to $102m, while its North American bricks company saw its earnings rise 9 per cent to $43m.

A diversified investor with equity holdings in other companies, mainly a large stake in Washington H Soul Pattinson, Brickworks said the market value of its listed investments increased by $263m during the year, to $3.4bn.

At its property arm, dominated by industrial property holdings and excluding revaluations and land sales, earnings were $121m, down 3 per cent.

Net rental income was broadly steady, with an increase in like-for-like gross rent and the completion of new developments at Oakdale West offset by higher borrowing costs in the Property Trust and the impact of the M7 Hub Estate sale.

“Within property, significant growth in rental income is forecast from the property trusts over the coming years, as we continue to develop existing estates,” said Mr Ellenor.

“We expect structural trends towards e-commerce and the digital economy will continue to drive demand for prime industrial facilities for many years to come. We are focused on identifying opportunities across the group’s vast land holdings to meet this demand and expand our development pipeline.

“Our building products businesses in Australia and North America are facing challenges over the next 12 months, with subdued building activity across many of our key markets.

“As such, we are planning temporary plant closures throughout 2025 to undertake maintenance and control inventory.”

Mr Ellenor said its investment in Soul Patts was expected to continue to deliver a stable and growing stream of earnings and dividends over the long term.

Originally published as Brickworks has slumped to a large loss as property and building sectors suffer