Brickworks flags potential WA exit

Brickworks has signalled a potential exit from its Western Australian operations after posting a loss from its WA business in its latest financial results.

The ASX-listed brick manufacturer revealed a $32 million after-tax impairment to its Austral Bricks operation in WA in its 1H23 results, linked to weak residential housing activity, lost market share and the revised outlook for the division.

The impairment was $46 million before tax.

In its results, the company flagged a review into Austral Bricks “with a decision to be made on whether to maintain brick operations in this state”.

"Operations in this state (WA) are now sub-scale and brick prices are approximately half those across the rest of the country," the company said.

"Based on the losses being incurred and the poor market outlook, further capital investment cannot be justified.

"As such, a detailed review of future options in this state is underway, including a potentila business sale or exit."

The company said the overall market in WA was weak.

“Residential housing activity has been weakest in Western Australia, with detached house and multi-residential commencements down 30 per cent and 34 per cent respectively,” the results read.

“The major east coast states have typically seen declines in the range of 10 to 20 per cent.”

Brickworks added that its sales volumes in WA were sharply lower than the prior corresponding period, due to a slowdown in building activity and the loss of key customer accounts, following an attempt to increase margins.

Austral Bricks closed its Bellevue brick plant in November last year, meaning it is only left with its Cardup facility in WA.

Relocation and restructuring costs linked to the closure of Bellevue amounted to $3 million.

Brickworks and BGC Australia are the state’s only two brick manufacturers, with the latter holding a significant majority market share after purchasing Midland Brick in 2020.

Its WA business accounted for 7 per cent of its sales in the six months to December 2022, while NSW accounted for 41 per cent and Victoria 39 per cent.

Detached housing made up 69 per cent of its sales in the first half of FY23, with multi-residential starts making up 19 per cent and non-residential at 13 per cent.

Brickworks review of its WA operations is expected to be complete in the second half of FY23.

Brickworks shares were up 3.91 per cent to $23.94 at the time of writing.