A doubling of gas prices and increased competition have dampened the half-year result of Brickworks' Western Australia business.
A doubling of gas prices and increased competition have dampened the half-year result of Brickworks' Western Australia business.
ASX-listed Brickworks today reported a 65 per cent drop in net profit for the six months to January 21, including non-regular items, to $88.2 million, down from $255.3 million in the corresponding period in fiscal 2009.
"Brickworks full year result is expected to be solid due to lower interest expense as a result of the conservative level of gearing and the improving performance of the Building Products division," the company said in statement to the Australian Securities Exchange today.
"This is due to the initial signs of recovery that are already evident in the housing market and the expansion of the building products division into new growth areas.
"The Investments division is also forecast to maintain performance."
Brickworks normalised net profit for the first half was $57 million, up 12.1 per cent from $50.8 million.
The company said its WA business delivered a solid result in a significantly more competitive market.
"Despite cut-throat pricing in the market, average selling prices increased by 4.2% during the period," Brickworks said.
"This increase in selling prices did not fully recover the 9.1% increase in production costs driven by the 100% increase in gas costs."
Brickworks added that sales volumes were supported by increased demand stemming from the First Home Owners Grant boost and the Building Education Revolution stimulus.
"The sales mix during this half year was more heavily weighted toward volume builders due to these stimulus packages," the company said.
"Residential building activity from the First Home Owner segment was declining at the end of the year."
Brickworks added that one plant was taken offline for maintenance during the Christmas period due to steady demand.
Nationally, the building products division recorded earnings before interest and tax (EBIT) of $21.8 million for the half year, up 32.9 per cent from the previous corresponding period, on increased volumes and higher average selling prices, the company said.
Its land and development business produced an EBIT of $12.3 million for the half year, an increase of 1.7 per cent from $12.1 million.
Investments EBIT was down 16.1 per cent at $41.1 million.
Brickworks investment in Washington Soul Pattinson & Company (WHSP) contributed $39.9 million for the half year, down 16.5 per cent from $47.8 million in the previous corresponding period.
But the market value of Brickworks 48.25 per cent share holding in WHSP was $1.4 billion, up 24.1 per cent, or by $271.0 million, from July 31, 2009.
Managing director Lindsay Partridge said he was "very pleased" with the result.
"Throughout the economic downturn, we adhered to our plan and undertook significant steps to improve the business and strengthen our financial position," Mr Partridge said.
"A total of $421.9 million was raised through a successful Share Purchase Plan, the sale and leaseback of the Wollert plant and the sale of surplus properties and non-core assets.
"Consequently, net debt to capital employed was reduced to 10.8 per cent."
Brickworks said normal earnings per share were 40.7 cents in the half year, up 6.4 per cent from 38.3 cents in the prior corresponding period, after recognising the issue of 14.1 million shares under the Share Purchase Plan.
The company declared an interim dividend of 13 cents, fully franked, up from 12.5 cents, fully franked.
