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Brickworks Limited
Review of Group Entities
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Building Products
Total dwelling commencements for Australia were up 3.1% to 225,367 for the twelve months to 30 June 2016.
This level of residential building activity is the highest on record in Australia and was driven by unprecedented
growth in non-detached housing commencements over the past four years. In the 12 months to June 2016
non-detached housing developments represented around 50% of total commencements.
Austral Bricks
delivered a 21.5% increase in earnings for the year. Sales revenue was up 6.9% to $405.8 million on
sales volume of over 670 million bricks. Performance on the east coast was particularly strong, driven primarily by
the major markets of New South Wales and Victoria.
Austral Masonry
delivered another increase in earnings on sales revenue of $90.9 million, up 4.4% on the
prior year. Total sales volume increased to 479,000 tonnes for the year, driven by strong growth in south-east
Queensland and New South Wales.
Bristile Roofing
’s earnings increased on the prior year, with revenue up 11.5% to $124.2 million, on sales volume
of almost 3.7 million square metres of tiles.
Austral Precast
delivered a strong turn-around in performance with earnings significantly higher than 2015 and
sales volume in excess of 20,000 panels for the year. Sales revenue was $74.0 million, up 11.4%.
Auswest Timber
’s revenue was down 5.7% at $52.5 million on sales volume of 62,000 cubic metres for the year.
Significant progress has been made to enhance operational efficiency, with productivity improvements being
widespread across all sites.
Land and Development
Land and Development produced an EBIT of $73.5 million for the year, up 14.1% from $64.4 million for the prior
year.
The improved result was due to the growth in the Joint Venture Industrial Property Trust (Property Trust) which
is a 50/50 partnership between Brickworks and the Goodman Industrial Trust. The Property Trust generated an
EBIT of $74.9 million, up 22.6% from $61.1 million in the prior year.
Net property income distributed from the Property Trust was $15.3 million, in line with the prior year, despite
the settlement of the Coles CDC facility in August 2015. The lost rent from this sale was offset by lower interest
payments, rent increases on stabilised assets and the additional rental income of new developments at Oakdale
Central and Rochedale.
The total value of the Property Trust at 31 July 2016 was $1.01 billion with borrowings of $347.4 million, giving a
total net value of $663.7 million. Brickworks’ share of the Property Trust’s net asset value was $331.9 million.
Outlook – Building Products
Current residential building activity in Australia is at the highest level on record, driven by strong population
growth over the past five years, low interest rates and rising house prices. With approvals remaining elevated,
commencements are likely to stay high for some time to come, particularly considering the significant weather
related delays experienced in June, July and August 2016.
Although the overall housing market remains very strong, conditions vary significantly across the country. On the
east coast, strong demand in Victoria is being fuelled by the highest rate of net interstate migration in the country.
Meanwhile in New South Wales, housing activity is expected to stay robust for an extended period of time, due to
a large undersupply of housing that developed during the 2000s and remains significant even today.
The short-term outlook for Building Products remains positive, with a full order book and a long pipeline of work
at higher margins in Brickworks' major east coast markets set to support earnings in 2017. Brickworks’ business
growth initiatives will provide diversification and underpin earnings in the event of a cyclical decline in market
activity over the medium term.
Contribution
Brickworks contributed a net profit of $9.6 million (2015: $19.5 million 44.2% held) to the Group. Its contribution
to regular profit was $38.8 million (2015: $29.1 million 44.2% held). These contributions exclude the WHSP profit
taken up by Brickworks under the equity accounting method.