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Brickworks posts 37% decline in HY profit but increases dividend

The Brickworks Limited (ASX: BKW) share price will be on watch on Thursday after the release of its half year results this morning.

How did Brickworks perform during the first half?

For the six months ended January 31, Brickworks posted total revenue of $449 million and an underlying net profit after tax of $100 million.

This was a 1% increase and 37% decline, respectively, over the corresponding period. The latter was in line with the guidance it provided with its trading update earlier this month.

On the bottom line the company reported underlying earnings per share of 67 cents, which was also down 37% on the prior corresponding period.

Pleasingly for shareholders, this didn’t stop Brickworks from growing its interim dividend. It declared a fully franked 20 cents per share dividend, which was up 5% on last year’s interim dividend.

What were the drivers of this result?

The main drag on the company’s performance during the first half was its Building Products Australia business. It reported a 10% decline in revenue to $338 million and a 62% fall in EBIT to $10 million.

Management blamed this underperformance on a sharp slowdown in building activity across the country and continued intense competition in Western Australia.

The company’s investment in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) also weighed on its results. Its share of the investment house’s profits fell 36% to $39 million during the half. This was due largely to the underperformance of New Hope Corporation Limited (ASX: NHC). Dividends received from the investment house were down 3% to $32 million, with an increase in dividends per share offset by a lower shareholding.

COVID-19 update.

Management notes that the coronavirus pandemic has resulted in significant uncertainty for Brickworks and the broader economy.

Brickworks Managing Director, Lindsay Partridge, commented: “We recognize that significant disruption is inevitable in the coming months. We are rapidly heading for a building downturn that will result in reduced demand for at least the remainder of the current financial year. Builders are reporting reduced activity at display homes and are imposing restrictions on the number of trades on site.”

“We have developed business planning and scenario modelling tools to support our decision making over the coming months. To preserve cash, we have delayed all non-contracted capital spend and non-essential expenditure, and employees who need to take time off work will utilise accrued leave where possible,” Mr Partridge added.

In light of this, the company advised that it has withdrawn any previous outlook statements and is unable to provide earnings guidance at this stage.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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