Brickworks faces tough times ahead

Company News

by Glenn Dyer

Thursday, we learned about impairment losses from Brickworks and its 43% shareholder, Washington H Soul Pattinson, related to their brick-making and masonry businesses in Sydney and the U.S.

The surprise write-down announced on Thursday means Brickworks will report a loss for the fiscal year ending in June when it releases its full-year results later this month.

Brickworks, which also owns 26% of Soul Patts, informed the ASX that the slump in building activity in Australia and parts of the U.S. has necessitated these impairment losses ahead of its full-year results.

Brickworks will recognize a total non-cash impairment charge of $123.5 million on a post-tax basis. The pre-tax write-down is just over $172 million.

On an after-tax basis, a $54.7 million charge is being written off the value of the Austral business in southwest Sydney (78.1 million before tax), and a charge of $68.8 million is being made against Brickworks North America assets ($94.3 million before tax).

Brickworks attributed the impairment of the value of Austral to the deterioration in high-rise building activity during the second half of the company's financial year ending July 31.

This was particularly evident in its key markets of Sydney and Brisbane, as well as a delay in realizing benefits from a new plant due to scaled-back operations.

In the U.S., the impairment of its brick-making businesses was blamed on the sharp decline in homebuilding activity, which Brickworks says has weakened the short-to-medium-term outlook for non-residential buildings in key U.S. markets.

Brickworks reported a $52 million statutory loss for its first half.

The company stated that its earnings were adversely impacted by property sales and non-cash property revaluations, resulting in a loss of $249 million in the first half of 2024, compared to a profit of $376 million in the corresponding period of 2023.

Specifically, Brickworks said it had a non-cash property devaluation of $233 million (compared to a $114 million gain in the first half of 2023) and a $16 million loss on property sales (compared to a $263 million profit in the first half of 2023).

Group Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) was a loss of $40 million in the first half, compared to a gain of $607 million in the prior corresponding period.

Excluding the impact of property revaluations and sales, EBITDA was $210 million, down 9%, primarily due to a lower contribution from Investments.

These results suggest that the full-year results will be significantly in the red on a statutory profit basis after one-off items are taken into account, and pre-significant item results will also be challenging.

Brickworks will report its full-year results on September 26.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?