It may on the face of it look like the lucrative flipside to the soaring cost of building materials and the so-called profitless boom of Australia’s construction sector.
And, to some extent, it is.
But the record annual profit revealed in the full-year results of the country’s largest brickmaker was driven not so much by its building products operation but rather from property investment.
ASX-listed Brickworks—a supplier of building products such as bricks, roofing tiles and masonry in Australia and North America—has reported a statutory net profit after tax of $854 million, up 257 per cent year-on-year.
Overall, its underlying net profit for the 12 months to July 31 jumped 159 per cent to $746 million.
Higher earnings from its building products operations—including Austral Bricks, Bristile Roofing and Austral Masonry—were boosted by a “standout” uplift in valuation of the group’s portfolio of industrial property in western Sydney and Brisbane.
The company’s property division, including its joint venture industrial property trust with Goodman Group, generated 60 per cent of all its profits, with earnings before interest and tax of $644 million (up 155 per cent).
By comparison, its building products operations had earnings before interest and tax of $153 million (up 220 per cent) in Australia and $25 million in North America (up 192 per cent).
“Brickworks has delivered an outstanding result ... achieving record earnings, amidst the backdrop of continued volatile economic conditions.
“It has been a landmark year for the company,” Brickworks chairman Robert Millner said in an ASX announcement.
In particular, he said, continued growth of online shopping and subsequent demand for well-located logistics facilities, had increased the value of Brickworks industrial property assets.
The company’s cut of the joint venture property trust with Goodman was revalued at $1.54 billion, up a total of $631 million, with its share of revaluation profit being $227 million.
Brickworks managing director Lindsay Partridge said a highlight for the year was the completion of the state-of-the-art Amazon distribution centre, the first facility at Oakdale West, in Sydney.
“This followed many years of planning and investment in site preparation and infrastructure at this estate. With further facilities now close to completion, Oakdale West is well on the way to becoming one of the most prestigious industrial property precincts in the southern hemisphere.”
Other estates at Oakdale South as well as in Brisbane at Rochedale are now fully built out, following the completion of final developments within the precincts during the second half.
Millner said that although conditions had been broadly supportive for Brickworks business, there also had been several “unique challenges”.
“In the first half, our building products businesses in Australia and North America were still being significantly impacted by Covid-related issues—including restrictions on building activity and workforce absenteeism,” he said.
“Then in the second half, unprecedented wet weather along the east coast of Australia, and severe labour shortages, impacted our operations in many ways.”
This included significant delays to the construction of its new brick plant on a site at Horsley Park in Sydney, which was flooded multiple times.
Partridge described it as a “frustrating year” for Brickworks’ Australian building products division with supply chain pressures also slowing the speed of construction across the industry.
“Underlying demand was strong throughout the year but sales momentum was repeatedly stifled by uncontrollable events, resulting in the business not reaching its full potential,” he said.
The company’s directors declared a fully franked final dividend of 41¢ a share, up 1¢ on the previous year, continuing its 46-year record of maintaining or increasing dividends.