24/09/2015 - 12:04

Price competition good news for builders

24/09/2015 - 12:04

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Building materials manufacturer Brickworks has disclosed that intense competition in the local market meant Western Australia was the only state where it was unable to lift prices for bricks during the past year.

Price competition good news for builders

Building materials manufacturer Brickworks has disclosed that intense competition in the local market meant Western Australia was the only state where it was unable to lift prices for bricks during the past year.

The ASX-listed company said strong price increases were achieved in all states except WA.

“Excluding the impact of WA, where pricing was flat, the average selling price was up 6.1 per cent on the prior year,” the company said in its annual results announcement.

Brickworks said WA was a relatively tough market for its main businesses, notably Austral Bricks, Austral Precast and Bristile Roofing.

It said Austral Bricks lifted earnings in WA to the highest level since 2010, primarily as a result of lower unit manufacturing costs due to prior year upgrades at its Bellevue plant.

“Despite the increased earnings and strong market activity, conditions in WA remain difficult, with competition for sales volume remaining intense,” the company said.

“This is reflected by a slight loss in market share, despite average selling prices remaining flat compared to the prior year.”

Brickworks major competitors in WA are ASX-listed Boral and local company Brikmakers, which started production in 2009 and describes itself as the state’s largest brick manufacturer.

Brikmakers parent company is BGC, which is the state’s (and Australia’s) largest home builder.

Brickworks managing director Lindsay Partridge said all three manufacturers would currently have about one-third of the WA market, compared to a 50:50 split before Brikmakers entered the market.

He said Brickworks had restructured extensively over the past six years, closing some factories and cutting staff, but more needed to be done.

"Our (rate of) return is not adequate at this time," he said.

Today’s annual update follows Brickworks’ disclosure in March that brick prices in WA were lower now than they were six years ago, despite record levels of building activity.

Brickworks said today that Austral Bricks reduced finished goods stock levels in all states except WA.

It said residential building activity in WA had slumped from the record levels earlier in the year.

In the second half of the financial year, building starts in WA were 15.5 per cent lower compared with the first half.

Bristile Roofing achieved higher prices across Australia, helped by an increased proportion of higher-priced commercial volume in WA.

Austral Precast achieved higher sales in Victoria and Queensland, offset by declines in NSW and WA.

Brickworks said Auswest Timbers, which also has operations in WA, reported lower earnings but a much improved underlying performance.

Overall, Brickworks reported an 18.8 per cent lift in underlying net profit to $120.3 million while statutory profit was down 24 per cent to $78.1 million.

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