The Brickworks Limited (ASX: BKW) share price will be on watch this morning after the release of a trading update ahead of its annual general meeting.
How is Brickworks performing in FY 2021?
According to the release, the Building Products Australia business has started FY 2021 strongly and has delivered first quarter earnings well ahead of the prior corresponding period.
Brickworks' Managing Director, Mr. Lindsay Partridge, commented: "Our home builder customers have a solid pipeline of work for the remainder of the financial year, underpinned by the various government stimulus measures currently in place in each state."
Mr Partridge revealed that the company was pro-active throughout the pandemic and worked hard to accelerate several important growth initiatives. This includes the introduction of a range of innovative new bricks, roof tiles, and masonry products.
The managing director also provided an update on its significant capital program. He expects this to strengthen its competitive position in a number of key markets. Part of this is the construction of its $75 million Austral Masonry plant in Sydney, which is well on track for commissioning in 2021.
North America.
Over in North America things are not quite as positive due to the pandemic. Management notes that there is short term uncertainty in the region, with the recent surge in infections causing ongoing disruptions to sales activity and manufacturing operations.
However, it is pleased with the underlying performance of the business and the progress achieved against its strategic priorities. Management notes that in August, it opened its new design studio in central Philadelphia. It believes this will further enhance its strong position in the high value architectural segment.
Looking ahead, management is confident that once conditions normalise, its North American operations will deliver improved earnings and growth for many years to come.
Property Trust.
One area which is performing particularly strongly is its Property Trust business with Goodman Group (ASX: GMG).
Since the end of the financial year, the construction of the state-of-the-art Amazon facility at Oakdale West is advancing and due to be complete in September 2021. Major infrastructure works are also proceeding to schedule and will allow construction of the Coles Group Ltd (ASX: COL) distribution warehouse to commence early in calendar 2021.
Following the completion of these two facilities, net rental distributions will increase by over 25%, and gross assets held within the Property Trust is expected to exceed $3 billion. There is also sufficient remaining land to provide at least a further five-year development pipeline.
Outlook.
Management believes that Brickworks is in a strong position, with a conservative debt level and a diversified portfolio of attractive assets.
Mr Partridge commented: "Within Building Products Australia, we have made an encouraging start to the year and our customers are reporting a strong pipeline of work in place. However, in North America conditions are more challenging, due to the ongoing impact of COVID-19. Of course, until a vaccine becomes widely available, there remains considerable uncertainty in both markets."
"Another strong half is expected for Property, and WHSP is expected to deliver a stable and growing stream of earnings and dividends over the long term," he concluded.
