The Brickworks Limited (ASX: BKW) share price is trading in the red on the ASX today, down 0.5% to $18.04 after the company reported 44% growth in underlying earnings and an underlying net profit after tax (NPAT) of $160 million in a record first-half result.
What were the highlights of Brickworks' results?
Brickworks reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) 44% higher on prior corresponding period (pcp) to $227 million and an 18% uptick in statutory NPAT to $115 million in the first half.
The company's record earnings saw underlying earnings per share (EPS) rise 37% to 107 cents per share (cps) while management also increased its dividend payout by 6% to 19 cps.
Divisionally, the company's assets remain heavily weighted towards its Investments segment while its Property and Building Products Australia segments make up the majority of the remaining assets.
The company holds a significant stake (~39.4%) of Washington H Soul Pattinson and Co. Ltd. (ASX: SOL) or "WHSP" shares while WHSP owns ~44% of Brickworks in a long-standing arrangement. In November and December, Brickworks sold 7.9 million WHSP shares at a weighted average sale price of $26.37 per share which generated cash proceeds of $208 million and allowed the company to reduce its debt after the acquisition of Glen-Gery during the year.
The Property division benefitted from revaluations during the period which increased earnings by $60 million and saw total income rise by 167% to $132 million. The company's Building Products Australia division saw earnings before interest and tax (EBIT) fall 35% to $26 million despite increased net tangible assets by 6% to $639 million.
The November 2018 acquisition of Glen-Gery, including 9 brick plants and 655 employees, has paid early dividends as it has performed ahead of expectations primarily from the sale of surplus clay from its Capitol site.
Is the Brickworks share price a Buy?
While Brickworks result is a big positive for the company with strong divisional and group results, I'd be hesitant to jump into the Industrials sector at this point in the economic cycle.
Brickworks continues to generate a large proportion of its earnings from bricks and remains beholden to the notoriously cyclical construction sector for product demand.
With global growth slowing and the Australian property and construction sector under increasing pressure, I'd be looking at these top growth shares as alternatives to Brickworks for the time being.
