Intense competition among the state’s three major brick manufacturers means prices are lower now than they were six years ago, despite record levels of building activity.
Intense competition among the state's three major brick manufacturers means prices are lower now than they were six years ago, despite record levels of building activity.
ASX-listed Brickworks disclosed today that its Austral Bricks subsidiary has achieved strong price increases in all states except Western Australia, where it said competition for sales volume remained strong.
This resulted in some market share losses, despite average selling prices remaining flat.
"Prices in this market remain lower than they were six years ago," Brickworks stated.
Nationally, Austral Bricks increased average selling prices by 3.8 per cent.
Arch competitor Boral increased its average selling prices by 2 per cent, but did not provide a breakdown by state.
The third major player in the WA market is BGC subsidiary Brikmakers, which does not disclose its earnings or price movements.
However, with BGC being the largest house builder in WA, it's safe to assume Brikmakers has taken a big part of the market from Austral and Boral.
In its earnings report today, Brickworks said residential building in WA had surged 17.5 per cent to a record 16,517 commencements in the half year.
This was similar to the national data, which showed a 13.2 per cent lift in half-year commencements to 102,736.
Austral said it plans a major refit at its Malaga plant later this year, with upgrades to the kiln and dryer designed to reduce costs.
This follows a shutdown and upgrade of its Bellevue plant, which Brickworks said delivered an overall reduction in manufacturing costs.
Among its other businesses, Brickworks said Bristile Roofing achieved higher earnings in WA, helped by an increased proportion of higher priced commercial volume.
Auswest Timbers delivered lower earnings, because of poor quality Jarrah log feedstock and ongoing operational issues at its Deanmill facility after an extensive rebuild.
The company said performance at Deanmill had improved substantially towards the end of the half year.
However, its earnings for the half year to January 2015 were adversely affected by a $6.8 million writedown in relation to Auswest's log licences.
Meanwhile, Brickworks managing director Lindsay Partridge says there's a wait of up to a year for new housing in some markets across Australia because of a lack of land releases and tradespeople to build new homes.
And that is helping to push up prices.
"Despite surging demand, Sydney still has the lowest number of lots being released for housing development of all major capitals," Mr Partridge said.
"This is rapidly pushing up prices and reducing the average lot size.
"There has been good progress in NSW to increase the release of land, but more land is required quickly.
"What we need are cheaper and larger lots that are readily available."
He said the bricklayer shortage had become critical with the national industry also struggling to find more than 200 apprentices.
Brickworks said its Austral Bricks business in NSW had the most orders since the lead-up to the 2000 Olympic Games and the upturn in housing activity showed no signs of easing.
Consequently, Austral Bricks will restart production at its Horsley Park Plant 2 in April, and prepare its second kiln in South Australia so it's ready for production by mid-2015.
Despite the demand, Brickworks reported a 25 per cent fall in interim net profit to $42.2 million, with the result hit by nearly $17 million in impairment charges.
But underlying profit, which excludes one-off items, rose 17.6 per cent to $62.8 million.
Shares in Brickworks closed 25 cents higher at $13.81.
