Building products group Brickworks is betting on a continuing property boom in Sydney and Melbourne to deliver improved results in 2016.
Australia’s largest maker of bricks and tiles reported record annual revenue of $701 million in its main building products division and said growth prospects were reflected in a strong order pipeline and price increases.
“The short term outlook for building products is very positive,” managing director Lindsay Partridge told analysts.
“Home builders in the major markets of Sydney and Melbourne are reporting strong demand and work in hand extending by up to one year,” he said.
Record low interest rates have fuelled a residential housing boom across the country over the past two years but particularly in Sydney and Melbourne. Sydney house prices have surged 18.9 per cent in the past year, while price increases have been more modest in other cities, but still average around eight per cent.
Sales volumes at the company’s Austral Bricks business jumped nearly 10 per cent.
Chairman Robert Millner told AAP the company is currently carting bricks from South Australia and Western Australia to NSW to meet demand and was considering reopening a mothballed kiln in South Australia.
The company said on Thursday its underlying profit for the 12 months ended July 31 rose 18.8 per cent to a record $120.30 million.
However, statutory net profit declined 24 per cent to $78.1 million, due to non-cash impairments in its Austral Precast and Auswest Timber units and in Washington Soul Pattinson subsidiaries New Hope Corporation and CopperChem.
Brickworks owns 42.7 per cent of investment group Washington H Soul Pattinson, which in turn owns 44.3 per cent of the building products maker.
Despite the momentum, the company said growth was being stymied by inflexible regulations and called for an overhaul of tax and workplace rules in the construction sector.
“If the country is to return to higher levels of economic growth over the long term, significant reform is required,” Mr Millner said, adding that Australian businesses need to overcome a distinct disadvantage in their cost structures.
Soul Pattinson, which is also chaired by Mr Millner, reported that its annual profit dropped by more than a third due to impairments and non-regular items.
RECORD REVENUE FROM PROPERTY BOOM
- Revenue of $723.6m, up 8pct
- Net profit of $78.1m, down 24pct
- Underlying net profit of $120.3m, up 19pct
- Fully franked final dividend of 30 cents, up from 28 cents.