The Brickworks Limited (ASX: BKW) share price is down over 5% today as the brick manufacturer announced the closure of plants in the US. A government directive means the company will close five of 12 plants currently in operation.
Brickworks shares have now fallen 26% from January highs, but have held up better than the broader market, with the S&P/ASX 200 Index (ASX: XJO) down over 30%.
Pennsylvania closes all 'non-life-sustaining' businesses
Pennsylvania Governor Tom Wolf has ordered all non-life-sustaining businesses in the state to close to slow the spread of coronavirus. The deadline for the shutdown is 8pm Thursday, 18 March Pennsylvania time.
This means Brickworks will be forced to close plants at Harmer, Bigley, Hanley, York, and Mid Atlantic. Its remaining seven plants will remain in operation.
Recent trading update
Brickworks has not previously issued any update in response to the coronavirus outbreak. However, it did issue a trading update last week following the announcement by Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) that net profit after tax (NPAT) attributable to shareholders for the period ending 31 January would likely be in the range of $45 million to $55 million. Brickworks has a 39.4% shareholding in Washington H. Soul Pattinson.
Brickworks further advised that it expected its Property division to deliver another strong result in 1HFY20 with the completion of two developments and further capitalisation of rate compression within the Property Trust. The result is, however, expected to be below the 1HFY19 result due to a lack of land sales. The sale of 10 hectares at Oakdale East into the Property Trust is anticipated in 2H2020.
Brickworks Building Products North America will deliver a higher contribution to results as the prior corresponding period (pcp) only included 2 months of ownership. Brickworks's Building Products Australia earnings are expected to be at a low point in 1H2020, and significantly below the prior period. This is due to high energy costs, low building activity, particularly difficult conditions in WA, and extensive plant shutdowns to complete maintenance and upgrade works.
Brickworks was expecting 1H20 statutory NPAT to be approximately 49% below the pcp, while underlying NPAT was anticipated to be 37% below the pcp. With the closures of US plants today, however, these results may be negatively impacted.
