What’s the Buzz Around Building Materials Manufacturer Brickworks?

Imagine a world without infrastructure- no buildings, no roads, just a tedious and endless stretch of barren land. It isn’t even imaginable, is it? Well, we most certainly aren’t scaring you, but instigating that construction and infrastructure don’t just develop buildings, they develop economies!

Thanks to building materials companies, economies are blessed with necessary infrastructure that facilitates the day to day activities within the economy and across it.

Let’s take a sneak peek at some industry trends-

• The APAC region is perhaps the largest and fastest growing construction material region worldwide, driven by rapid industrialisation, urbanisation, population growth and so on
• The global market is likely to exceed USD 1 trillion this year
• Specially Australia is likely to record a CAGR of over 8 per cent by 2024, which could equate to up to $194 billion (building construction industry)
• The USA bricks industry is large but appears to be over 20 years behind Australia

In this backdrop, we will be discussing an ASX-listed materials sector company, which is also one of the world's largest and most diverse building materials manufacturer- given an ocean full of listed entities on this ASX GICS, it’s difficult but- do you have a guess?

If your guess was Brickworks Limited (ASX:BKW), you are right! Now that we have finally tapped our topic of this article, let’s deep dive-

Brickworks Limited- Unbroken Long History Stretching Back to 1934

BKW is renowned amid customers for its innovation, professionalism and ever-dependable products and services. These include masonry and stone, clay bricks and pavers, specialised building systems, roofing, cement as well as precast. The Company has a wide product portfolio and production and sales facilities across North America and Australia.

BKW’s 4 segments comprises of- Investments, Building Products North America, Property and Building Products Australia. Some of BKW’s brands include Austral bricks, Bowral Bricks, Glen-Gery, Nubrik, Austral Masonry, GB Masonry and UrbanStone, to name a few.

BKW to Suffer from COVID 19 Woes?

COVID 19, the novel coronavirus outbreak that had shaken the globe, is spreading very quickly. It is not a regional issue for China (the epicentre) alone but has finally called for a global and immediate response. The virus, which has been deemed to be a pandemic by the World Health Organisation, has hit every economy of the world. A John Hopkins database suggests that there have been over 244k confirmed cases and more than 10k deaths across the globe (as on 20 March 2020).

To safeguard citizens, who are proving to be vulnerable to the COVID 19 plague, governments and international organisations have been coming up with fiscal and monetary policies, ramping up medical facilities and introducing war time measures to keep the spread at the best possible parking bay.

Likewise, Pennsylvania Governor Tom Wolf has issued a notice, ordering all non-life-sustaining businesses in the region to shut down their physical locations in an effort to decelerate the spread of the COVID 19 virus.

You would be wondering- why have we drifted from our discussion of Brickworks to a pandemic? Because, the Company might see some effect of this ongoing global crisis. We’ll tell you how-

BKW has 12 plants in Pennsylvania. After the Governor’s order, the Company has to close operations in 5 of these (which include the plants in Harmer, Bigler, Hanley, York and Mid Atlantic). The remaining 7 plants will remain in operation.

The closure of plants translates into a slowdown of operations. It should be noted here that production companies have perhaps had the hardest hit from the COVID 19, with locked down cities, shutdowns and employees obliged to not work in crowded places.

However, BKW has not released any official statement instigating the repercussions of the recent closure of operations, which is expected as and when more information is available to the Company.

BKW’s 1H20 Trading Update

On 12 March, BKW announced that Washington H. Soul Pattinson Limited (ASX:SOL), will register a half year net profit after tax attributable to WHSP shareholders in the range of $45-55 million. The regular net profit after tax attributable to WHSP shareholders is likely to be in the range of $120-130 million.

BKW is bound to have an impact of this through the equity accounted profit of its 39.4 per cent shareholding in SOL. Moreover, BKW provided the outlook for the period including of-

• Brickworks Property will deliver a robust result, with the completion of two developments and further capitalisation rate compression within the Property Trust
• Brickworks Building Products North America will deliver a higher contribution
• Brickworks Building Products Australia earnings are expected to be at a low point
• 1H20 Statutory NPAT is likely to be ~49 per cent lower, relative to 1H19 (pcp)
• 1H20 Underlying NPAT from continuing operations is expected to be ~37 per cent below pcp

Stock Performance

The Company has listed itself on the ASX in 1962 and has a stupendous history of paying dividends each year to its loyal shareholder base. Currently, it has an annual dividend yield of 3.59 per cent.

After the close of the trade session on 20 March 2020, BKW quoted $ 15.37, down by 3.212 per cent.

Disclaimer

This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.