Is the Brickworks Limited (ASX: BKW) share price a buy? The company held its annual general meeting (AGM) yesterday.
AGM update
Property trust
The construction business gave some more details about its industrial property trust's progress that it owns half of together with Goodman Group (ASX: GMG). At the end of FY20, its total assets stood at over $2 billion. After including debt, Brickworks' share of net assets was $727 million.
It said that development activity by the property trust has continued at an unprecedented scale. At Oakdale West in Sydney, construction of the Amazon distribution facility is well advanced and is due to be completed in September 2021. Brickworks also said that infrastructure works are also proceeding to schedule and will allow construction of the Coles Group Ltd (ASX: COL) distribution warehouse to commence early in 2021.
Once these two facilities are completed, net rental distributions will increase by over 25% and gross assets held within the property trust is expected to exceed $3 billion. Management said that there is sufficient remaining land to provide at least a further five years of development.
Regarding the property trust, Brickworks managing director Lindsay Partridge said: "The COVID-19 pandemic has only accelerated industry trends towards online shopping, and this is fuelling demand for the company's prime industrial property. Interest from potential new tenants is strong, with discussions well underway with several parties in relation to additional leasing opportunities within the property trust."
Building products
Brickworks said that its Australian building products division has made a strong start to FY21, with first quarter earnings well ahead of the prior corresponding period.
Its 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. However, in Western Australia trading conditions remain difficult.
Brickworks is in the middle of a significant capital investment program to strengthen its position in key markets. The Southern Cross Cement terminal was completed in 2020 and the construction of the $75 million Australian Masonry plant in Sydney is well on track for commissioning in 2021.
At Horsley Park, it has demolished the old brick kiln and associated equipment at the second plant, which will allow the construction of a new $125 million face brick plant. Brickworks believes this will be the most advanced brick plant ever built when completed.
North America
North America sales in recent months have been below expectations because of impacts of COVID-19. However, it is still the leading brick maker in the north east region of the US.
Brickworks said that the deferral of many projects by state authorities due to financing concerns and the uncertainty relating to the US election have caused a slowdown in non-residential construction activity.
Despite that, Brickworks said that it was pleased with the underlying performance of the business and the progress it has achieved over the past two years.
Brickworks is confident that once conditions normalise the North American operations will deliver improved earnings and growth for many years to come.
Is the Brickworks share price a buy?
The construction business said that it's in a strong position with a conservative debt level and a diversified portfolio of attractive assets.
Brickworks mentioned that until a vaccine becomes widely available, there will still be quite a lot of uncertainty. The company also mentioned that Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is expected to deliver a stable and growing stream of earnings and dividends over the long-term.
The Brickworks share price went up around 4% in response to this update. The Motley Fool Dividend Investor service still rate Brickworks as a buy.
