Brickworks shares tumble on $172m profit hit

The company is battling tough trading condition in two key markets.

| More on:
A man holds his head in his hands, despairing at the bad result he's reading on his computer.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

Brickworks Limited (ASX: BKW) shares are under pressure on Thursday.

In morning trade, the building products company's shares are down 3% to $25.26.

Why are Brickworks shares falling?

Investors have been selling the company's shares today after it released an update on its full year results.

According to the release, Brickworks has undertaken a review of the carrying values of its assets, as at 31 July 2024.

In accordance with its accounting policies and the applicable accounting standards, Brickworks will recognise a total non-cash impairment charge of $172.4 million (pre-tax) or $123.5 million (post-tax) in its FY 2024 full year results.

What are the impairments?

Brickworks' impairment charges relate to its Austral Masonry and Brickworks North America businesses.

For Austral Masonry, it will recognise a non-cash impairment charge of $78.1 million pre-tax.

This reflects an accelerated deterioration in multi-residential building activity in the second half of FY 2024. It notes that June commencements across Australia are forecast to be at the lowest level for more than a decade.

The decline has been particularly severe in the high-rise segment (4+ storeys) in Sydney and Brisbane, which are key markets for Austral Masonry.

In addition, it includes a delay in realisation of the full benefits from the increased invested capital in Austral Masonry, including the new plant at Oakdale, in Western Sydney. This follows the scaled back production output in response to the decline in market activity.

Management also notes that higher costs across the business, such as land tax and raw materials, are yet to be fully recovered by recent price increases.

What about Brickworks North America?

For Brickworks North America, it will recognise a non-cash impairment charge of $94.3 million pre-tax.

This is reflective of significantly reduced activity during the second half of FY 2024, and the weakening of the short to medium term outlook for non-residential building in the key markets of the Northeast and Midwest regions of the United States.

In addition, it highlights that following the completion of a significant plant rationalisation and upgrade program, subdued building activity has resulted in scaled back production output and a delay in realisation of the full benefits of these initiatives.

And finally, strong competition, particularly in the single-family housing segment, has resulted in pricing and volume pressure in selected regional markets.

No guidance has been given for Brickworks' results. However, investors won't have to wait long to find out how good or bad they are. Management advised that it plans to release its FY 2024 results in two weeks on 26 September.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks. The Motley Fool Australia has positions in and has recommended Brickworks. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Industrials Shares

American soldier in military uniform using laptop for drone controlling.
Industrials Shares

Are ASX defence shares the next big opportunity?

Many analysts at Sydney's ASX Investor Day spoke of defence as an emerging global investment theme.

Read more »

Army man and woman on digital devices.
Industrials Shares

ASX defence stock jumps 10% on US army order

Let's see what is getting investors excited on Wednesday.

Read more »

US navy ship sailing along at sunset.
Industrials Shares

Austal share price smashes new record high as takeover rumours swirl again

Investors were buying up shares in this Australian global defence shipbuilder today.

Read more »

man thinking about whether to invest in bitcoin
Broker Notes

Why Macquarie expects this ASX 200 dividend stock to keep outperforming

Macquarie has tipped this ASX 200 dividend stock to outperform. Let’s find out why.

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Mergers & Acquisitions

Why are Brickworks shares up 18% today?

Let's find out what is getting investors excited this morning.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Broker Notes

How this undervalued ASX All Ords share could rocket 80% in a year

A leading fund manager expects a big turnaround for this beaten-down ASX All Ords stock.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Industrials Shares

Key takeaways from ALS shares results according to Macquarie

ALS announced an underlying net profit after tax (NPAT) of $312 million this week.

Read more »

A woman sits crossed legged on seats at an airport holding her ticket and smiling.
Industrials Shares

What does Macquarie think Auckland International Airport shares are worth?

Is it time to invest in this unique holding?

Read more »