Brickworks (ASX:BKW) share price jumps as net profit soars by 95%

The company’s shares are on the rise after it released its results for FY21

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The Brickworks Limited (ASX: BKW) share price is rising this Thursday after the company released its full-year results for the 12 months to 31 July 2021.

At the time of writing, shares in the construction materials manufacturer are trading for $24.96 – up 2%. The S&P/ASX 200 Index (ASX: XJO) is 0.95% higher.

Let’s take a closer look at today’s results.

Brickworks share price leaps as full-year dividend increases

  • Underlying net profit after tax (NPAT) of $285 million – up 95% on the prior corresponding period (pcp);
  • Total revenue fell 6% on the pcp to $890 million;
  • Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose 61% to $453 million;
  • Underlying earnings per share (EPS) of $1.89 – up 93%; and
  • A full-year dividend of 61 cents per share, fully franked – including a 40 cent per share final dividend. This is a rise of 3% on the pcp and represents a yield of about 2.5% on the previous day’s close.

What happened in FY21 for Brickworks?

According to the release, property contributed to a “record” full-year result, generating EBIT of $253 million. This was due primarily to a 50/50 joint venture property trust with Goodman Group (ASX: GMG).

Building products EBITDA rose 7% in the year to $97 million. The company described this performance as “relatively steady”. In North America, building products EBITDA rose 10% to $20 million. Brickworks says, however, that COVID-19 had material and significant impacts on the working conditions of its plants in the regions.

Finally, Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – the largest shareholder in Brickworks – interest in the company has increased to $3.4 billion.

These factors may be contributing to the rising Brickworks share price.

What did management say?

Brickworks chair Robert Millner commented:

Brickworks’ business model is focussed on building a diversified portfolio of assets with increasing value. Therefore, in addition to delivering record underlying earnings, I am particularly pleased to report an exceptional year of asset growth for our company.

The value of our 39.4% stake in WHSP increased by $1.2 billion over the period. Including further gains since the end of the year, the market value of this investment now stands at around $3.4 billion. Adding the net asset value of our property and building products assets, and taking into account net debt, the total asset backing is $4.8 billion.

On a per share basis, our asset value has increased by 149% over the past 10 years, and now stands at almost $32. This level of asset backing provides considerable support for our current share price.

Brickworks managing director Lindsay Partridge added:

Early in the financial year, sales were subdued, due primarily to disruptions and uncertainty at the start of the pandemic. However, as the year progressed, demand improved in response to the government stimulus measures put in place to boost housing activity across the country.

Whilst underlying demand was strong and broad-based across all states, sales momentum was stifled by intermittent lock-downs in our two largest markets, Sydney and Melbourne.

What’s next for Brickworks?

Looking forward, Brickworks says it is in a “strong” position going into the new year.

The company says the underlying demand for building products is strong with a “large backlog” of detached housing to fulfill. While the Sydney Delta outbreak has caused some disruption to the business, operations are back to 90% of their previous levels.

The company expects higher sales volumes out of North America, as well as higher earnings.

Brickworks share price snapshot

Over the past 12 months, the Brickworks share price has increased 32.6%. This is 8 percentage points greater than the ASX 200. Since the start of 2021, Brickworks has outpaced the ASX 200 by 18 percentage points.

Brickworks has a market capitalisation of about $3.8 billion.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Brickworks. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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