Brickworks (ASX: BKW) is Australia's largest brick manufacturer. The company manufactures and supplies bricks, pavers, concrete masonry and roofing tiles to the building and construction industry.
The Building Products Group consists of the following brands – Austral Bricks, Austral Masonry, Austral Precast, Bristile Roofing, Auswest Timber, Bowral Bricks, Daniel Robertson, Nubrik and GB Masonry.
The Land and Development Group exists to maximise the value of surplus land created by the Building Products Group. It is a legacy of earlier brick manufacturing activities. The sale and/or development of the extensive land holdings will supplement earnings during the next decade, although timing makes contributions unpredictable.
A major investment in Washington H. Soul Pattinson (ASX: SOL) provides non-cyclical diversification. This investment of 43% in Washington H. Soul Pattinson has provided a stabilizer to the often unpredictable Building Products Group. Therefore, as a diversified business, Brickworks is less exposed to market volatility, enabling long term strategic decisions to be made.
Analysis of Brickworks needs to take account the last 15 years, to include at least one business cycle. Over that time, Brickworks has delivered stable and growing dividends. Normal dividends in 2013 are more than four times higher in 1998, as pointed out by Robert Millner, company chairman, at the 79th Annual General Meeting. Furthermore, he stated that this compares with 3.3 times for Adelaide Brighton (ASX: ABC) and 1.6 times for James Hardie (ASX: JHX). By contrast both Boral (ASX: BLD) and CSR (ASX: CSR) dividends are now lower than those paid out since 2001 and 2003 respectively, post significant demerger transactions of those companies.
Brickworks' goal remains to be Australia's best building products company. This requires continued effort on being customer-focused, striving for operational excellence, investing in staff and providing leading products and services.
Washington H. Soul Pattinson holds 48% of Brickworks. The reciprocal holdings mean that neither company is vulnerable to takeover, making each a very long term investment for all shareholders. A recent move to de-couple this arrangement was defeated at the 79th Annual General Meeting of Brickworks after a select committee of independent directors had considered the matter.
Foolish takeaway
Brickworks is a conservatively managed group and can be included with confidence in long-term income and growth portfolios.
