Brickworks FY24 earnings call highlights

Brickworks (ASX: BKW) shares rallied as much as 8.9% on Thursday after its FY24 earnings and dividend came out better-than-feared amid deteriorating trends for the building and construction sector.

FY24 Earnings Summary

• Total revenue down 8% to $1.08 billion

• Underlying EBITDA (ex-property revaluation) down 4% to $387 million

• Underlying EBITDA (continuing ops) down 80% to $157 million

• Underlying NPAT down 88% to $61 million

• Statutory net loss of $119 million, adversely impacted by non-cash property devaluation and building products impairment

• Total FY24 dividend of 67 cents per share (FY23: 65 cents)

Earnings Call Highlights

The below topics have been answered by CFO Grant Douglas and Executive General Manager Megan Kublins.

Capex outlook: "With the planned major investment program now largely complete, capital spend has reduced in FY24, and we expect a significant further reduction in spend in FY25 and FY26."

Balance sheet: "Taking into account the reduced equity, balance sheet gearing increased slightly to 20%. Covenant gearing as defined by bank facility agreements is 15% and remains well below the covenant level of 40%."

Acquisition outlook: "Following a period of significant investment, our short-term priority is to maximise cash generation."

Building trends: "In Australia, carbon emissions have followed a general downward trend, supported by product redesign, increased use of recycled materials, and capital investments into modern fuel-efficient production processes."

Sector trends: "Residential commencements continue to decline during FY24... The steepest decline was in New South Wales, down 22% ... Multi-residential commencements were also down by 10% in FY24, driven by a 50% fall in high-rise apartment construction over the past five years."

Economic outlook: "Non-residential building activity has varied significantly across the country, with increases in Western Australia and Queensland offset by declines in Victoria and New South Wales."

Sector outlook: "Building products business in Australia and North America is facing challenges in the short term ... we are planning temporary plant closures throughout FY25 to undertake maintenance and control inventory."

Structural trends: "Building products business in Australia and North America is facing challenges in the short term, with subdued building activity across most of our key markets over the next 12 months."

Sector trends: "Structural trends towards e-commerce and the digital economy will continue to drive demand for our prime industrial facilities for many years to come."

Development profits: "Our property market conditions appear to have stabilised over the past six months. We are focused on meeting this demand by continuing to identify opportunities within our portfolio to expand our development pipeline."

Masonry business impairment: "The decline in high-rise residential construction ... has had a significant impact on our Austral Masonry sales, which have a high exposure to this segment."

Analyst Q&A Highlights

Capex and borrowing cost outlook: "We're certainly looking to preserve cash and focus on cash generation ... From a CapEx perspective, obviously expecting that to take another step down ... we’re running at about $40 million this year ... Debt levels probably stay fairly steady ... interest costs align with that ... we'll see where the interest rates go over the next 6 to 12 months."

Do metal roofs impact brick sales: "Metal and colorbond ... has been gaining traction ... Our roof tile sales have been relatively flat ... We've seen our rooftop sales pick up substantially over the last two months."

Possibility of data centre development in the future: "The property we have at Oakdale East is really well located as far as power .. Definitely, and Goodman is at the forefront of this at the moment."

Cash flow outlook: "We’ve gone through a large investment program over the last five years ... CapEx spend coming off more depreciation levels over the next sort of few years ... That will work its way back into free cash flow, especially into the building products business."

US market softness: "I think the softness is of course a bit more by surprise in the second half. I mean, the Midwest and the Northeast markets came off, you know, there is not so much investment around in multi-family. So those projects aren't getting around off the ground ... So, you know, I think that's taken a pause."

Prospects to ship bricks from the US and sell in the UK: "There is some good profit in the product going to the UK ... a great deal we struck with Brickability ... a third of the output sold for a decade. So, I'm excited about that."

Does the Fed 50 bp cut affect outlook: "No, I think that was fairly well anticipated to come through. And I think ... people, you know, just waiting to see what will happen in the election."

US market share: "You look at the whole of the US ... markets, you have between 7 billion and 9 billion a year, and we in sales results for the 400 million bricks ... we're very strong in places like Chicago and New York."

This article was generated with the support of AI and reviewed by an editor.