Brickworks share price sinks on huge FY23 profit decline

Brickworks' earnings took a hit in FY 2023 but it still managed to increase its dividend.

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The Brickworks Limited (ASX: BKW) share price is falling on Thursday morning.

At the time of writing, the building products company's shares are down 5% to $24.44 following the release of its FY 2023 results.

Brickworks share price falls on FY 2023 results

  • Total revenue up 8% to $1,181 million
  • Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) down 26% to $784 million
  • Underlying net profit after tax down 32% to $508 million
  • Statutory net profit after tax down 54% to $395 million
  • Final dividend increased 2% to 42 cents per share

What happened during the financial year?

For the 12 months ended 31 July, Brickworks reported an 8% increase in revenue to $1,181 million.

This reflects a 6% increase in Building Products Australia revenue to $734 million and a 12% lift in Building Products North America revenue to $447 million. Management advised that its top-line growth in both markets was driven largely by price increases.

Things weren't anywhere near as positive for the company's earnings, which were impacted by cost pressures. For example, across its Austral Bricks business, unit electricity costs were up 28% year on year, labour was up 13%, and maintenance was up 12%.

This ultimately led to Building Products Australia EBITDA falling 13% to $100 million and Building Products North America EBITDA falling 18% to $40 million.

The company's joint venture with Goodman Group (ASX: GMG) continues to generate big earnings. While down 21% year on year, its EBITDA of $506 million is still the second highest ever achieved.

This brought Brickworks' total underlying EBITDA to $784 million, which is down 26% on the prior corresponding period. And on the bottom line, the company's underlying net profit after tax fell 32% to $395 million.

Despite its earnings decline, the Brickworks board decided to keep its dividend increase streak alive. A final dividend of 42 cents per share was declared, which is up 2% on the prior corresponding period. This took its FY 2023 dividend to 65 cents per share, which is up 3%.

Outlook commentary

Brickworks' managing director, Lindsay Partridge, appears positive on the company's outlook despite the tough environment. He said:

Within our Property Trusts, the development pipeline is strong, and we expect a significant increase in rental income over the coming years as new developments are completed and rent reviews are undertaken. Across Building Products, order intake is now softening, and we are anticipating a decline in demand in the months ahead. Offsetting the impact of lower sales, unit margins will be supported by price increases and previously implemented plant rationalisation and upgrades. In addition, the exit of the loss-making Austral Bricks Western Australia business will provide a positive impact on earnings.

Having modernised our plant fleet and expanded scale over the past five years through our significant investment program, our priority has now turned to maximising the returns delivered by the enlarged asset base and improving cash generation. With our diversified portfolio of high-quality assets, Brickworks is well placed to meet any future challenges and continue to deliver good performance for shareholders.

The Brickworks share price is still up 16% over the last 12 months despite today's decline.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Goodman Group. The Motley Fool Australia has positions in and has recommended Brickworks. The Motley Fool Australia has recommended Goodman Group. 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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