Why the Brickworks Share Price Slipped Today

It’s been a great year for housing industry. Well, at least for some stakeholders. According to official and private sector reports, there’s a real residential construction boom happening. Houses and apartments are going up around the country at a rate of knots. Entire inner city areas, once completely deserted, are being given new life.

You’d think that would be great for building material suppliers. Unfortunately, as Boral’s results earlier in the year proved, that’s not necessarily the case. Brickworks [ASX:BKW] too has not been immune from cost pressures, though this time of a different kind.

The Brickworks share price opened down this morning, from yesterday’s close of $15.39. As at 10:43am it’s trading down 2.08% at $15.02.

BKW Brickworks share price 24 09 2015
Source: Google Finance
[Click to enlarge]

Brickworks released its FY15 results this morning. The line most spectators zeroed in on? Statutory NPAT. Brickworks’ statutory profit is down 24%. It’s gone from $102.8 million to $78.1 million.

Underlying NPAT was $120 million, up by 18.8%.

Total revenue was up a more modest 8%, to $723.6 million.

Earnings per share got a boost, too. EPS went up 18.5% to $0.811. That meant BKW could afford to pay shareholders a smidge more. The final dividend went up 7.1% to $0.30. That takes the full year dividend to $0.45.

Robert Millnar is the chairman of Brickworks. He commented on the result, while making a thinly veiled plea to our new prime minister:

Although housing activity is now taking up the slack in the broader Australian economy, if the country is to return to higher levels of economic growth over the long term, significant reform is required. Payroll tax is tantamount to a fine on employing people and should be abolished. Despite our significant investment in staff training and development programs, labour productivity continues to be stymied by inflexible workplace regulations.         

Interesting choice of platform, his company’s full year results. It might seem like he’s trying to draw attention away from something fundamental about his business. But anyway.

Aside from that comment, management has a positive outlook for the company’s businesses. ‘The outlook for Building Products is very positive. With a long pipeline of work and price rises successfully implemented in our major markets, earnings are expected to improve in 2016,’ said managing director Lindsay Partridge. Without the significant items, like the non-cash impairments BKW reported in its first half, perhaps its statutory NPAT will be a better reflection of what it has to offer.

If you’re looking for an alternative way to profit from the housing boom, you may be looking closely at building products makers. But there are other ways to add exposure to property to your portfolio. You can invest in properties indirectly via the Aussie stock market.

By buying shares in a developer or manager, or units in a trust, you can get access to property you wouldn’t be able to consider as an individual. It’s a great way to make sure the property boom doesn’t pass you by, whilst also retaining the ability to scale your investment.

Money Morning publisher Kris Sayce reveals all in his free report. ‘Three Best Investments in Australia for 2015 and Beyond’ is available here for free. In this report, Kris explains why property is well worth your attention right now. And he suggests a few different property plays to get you started. Read on and you’ll discover two other exciting types of investments that you may not have considered. Hint: one of them has, in past years, been one of Australia’s most ‘hated’ sectors.

It will be interesting to see where the record high housing starts numbers take BKW. Not to mention the Brickworks share price. While you wait for that to play out, spend some time checking out other property-related opportunities. Make sure to download and read your free copy of ‘Three Best Investments’.

Eva Mellors,
Contributor, Money Morning

Money Morning Australia