Today, 21 March 2019, Brickworks Limited (ASX: BKW) reported robust growth in half-year earnings with EBIT up 46% to $211 million for the first half of Fiscal 2019. The higher earnings reflect the strong property result and gain on sale and revaluation of assets.
The Group reported a record first-half underlying profit from continuing operations of $160 million, up 37% on the prior period. EBITDA from continuing operations was $227 million, up 44% compared to the previous corresponding period.
Brickworks sold the WHSP shares for the first time since acquisition in 1969. This underscores the sales of 7.9 million WHSP shares at a weighted average sale price of $26.37 per share in November and December. However, the WHSP remains an essential strategic asset for Brickworks in it retains 94.3 million shares, i.e., approximately 39.4% interest in WHSP.
On the balance sheet front, net debt reduced with proceeds from WHSP sale more than offsetting GlenGery acquisition costs, taking gearing to decline to a conservative 11%. NTA per share increased by 5% to $13.04 in 1H2019 compared to the NTA of $12.42 per share in the previous corresponding period.
Total shareholder’s equity increased by $62 million during the period or 39 cents per share. However, there has been a decrease in operating cash flow, primarily due to lower Building Products earnings. This translates a plunge of 35% in Building Products Australia EBIT to $26 million resulting from Lower brick sales volume in NSW and WA as well as increased energy cost.
The Group continued to expand its international footprints through the acquisition of US-based differentiated brick business, Glen-Gery. The management told that Glen-Gery holds a leading position in the north-east, mid-Atlantic and mid-west regions of the United States, an area where other major players have a minimal presence. It is also stated to have the potential to provide a platform for long term growth.
In the Building Products Australia segment, Brickworks expects sales volume to decline on the east coast in the last quarter of FY2019 as the existing pipeline of housing is built out. Moreover, the rising energy costs to continue to adversely impact earnings in FY2019 which could be as massive as full year impact -$12 million. The company further intends to sell 10 hectares at Oakdale East into the Trust in late calendar 2019.
Brickworks has posted stable short term outlook for Building Products North America with healthy forward order book and medium and longer term growth anticipated due to increased building activity and market consolidation.
The Investments segment which forms part of 54% of Brickworks assets is reportedly expected to witness a long-term growth in earnings, dividends and market value of WHSP, albeit the contribution to Brickworks will be impacted by the reduced shareholding.
At the time of writing, 21 March 2019 (1:03 PM AEST), BKW is trading flat with the daily volume change of 242,175 shares. The stock last traded at $18.120 with a price to earnings multiple of 15.420x and a market capitalisation of $2.71 billion.