In morning trade the Brickworks Limited (ASX: BKW) share price is rising following the release of its half year results.
At the time of writing, the building products company's shares are up 2.5% to $19.41.
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How did Brickworks perform in the first half?
For the six months ended 31 January, Brickworks reported a 4% decline in revenue to $432 million. This comprises Australian revenue of $330 million and North American revenue of $102 million.
It was a similar story for the company's earnings before interest and tax (EBIT). Half year EBIT was down 6% over the prior corresponding period to $127 million.
This was driven partly by a 33% decrease in North American EBIT to $4 million following significant disruption by the COVID-19 pandemic. It partially offset a 60% lift in Australian EBIT to $16 million, which was underpinned by cost reductions.
Once again, the company's Property Trust joint venture with Goodman Group (ASX: GMG) was its saving grace. It helped its Property business generate EBIT of $92 million for the half. Management notes that the business benefited from very favourable revaluations and profit on the sale of land.
On the bottom line, Brickworks posted an underlying net profit after tax of $90 million, which was down 10% compared to last year. However, on a statutory basis, which includes significant items, Brickworks' net profit increased 22% to $71 million.
Positively, despite the decline in underlying profit, the Brickworks board has increased its interim dividend by 5% to 21 cents per share. This maintains its 45-year record of increasing dividends.
Outlook
Brickworks Managing Director, Mr. Lindsay Partridge, appears cautiously optimistic on the future. This is thanks to its conservative gearing, its diversified portfolio of attractive assets, and improving demand.
He said: "Development activity within the Property Trust is continuing at an unprecedented scale. This includes the construction of new facilities to meet lease pre-commitments across four of our Estates in Sydney and Brisbane. The completion of these facilities within the next two years will result in gross rent within the Trust increasing by over 40%, with significant further land remaining for development."
Mr Partridge expects its Australian operations to perform strongly in the short term.
"Within Building Products Australia, the short-term outlook is positive, with demand gathering momentum in recent months. As demand grows, we anticipate sales volume will be limited by the availability of tradespeople such as brick layers and roof tilers, and this is likely to extend the existing pipeline of work, resulting in an elevated period of activity for at least a year. However, looking beyond the current stimulus induced surge in activity, significant uncertainty remains," he explained.
Positively, the Managing Director notes that demand is recovering in the North American market.
"In North America, we have seen a strong recovery in demand during March, with improved weather and increased optimism of a stimulus led recovery. Daily order intake is now back to pre-pandemic levels, and as conditions continue to normalise, we are confident that our North American operations will deliver improved earnings and growth for many years to come." "WHSP is expected to deliver a stable and growing stream of earnings and dividends over the long term," Mr Partridge concluded.
