Bricks and masonry supplier Brickworks has booked a 70 per cent fall in annual net profit as residential building starts dropped to near 30-year lows.
But the company is hopeful of a patchy recovery in the next 12 months.
Brickworks on Thursday reported its net profit fell to $43.3 million for the year to July 31 from $142.5 million in 2010/11.
The result included $35.6 million in significant charges, included restructuring costs and a $31.6 million writedown on the value of some of Brickworks’ building products businesses.
The writedown was due to lower residential building activity and the inability to immediately recover the full impact of the carbon tax.
Managing director Lindsay Partridge said the latest forward indicators of housing activity suggested the bottom of the residential building cycle may be close.
“The recovery in building activity is likely to be patchy over the next 12 months, with weak full-time employment growth, low confidence and poor affordability eliminating any impact from lower interest rates to date,” he said.
Mr Partridge said the residential housing market could improve if commodity prices continued falling and the value of the Australian dollar dropped.
But he declined to offer any guidance on profit for the current fiscal year, saying there were too many factors outside the company’s control.
“It’s been a very difficult year (2012) for us historically, but we’re a very strong company,” he told AAP.
“Our earnings are spread across building products, property and investments, and we hope on balance that we wouldn’t deteriorate any further from here.”
Brickworks’ earnings from its building products businesses in the second half were in line with the first half as restructuring initiatives took effect.
Earnings from land and development operations fell as a result of a significant reduction in land sales, while investment earnings were steady.
A bright spot for Brickworks was the lift in its pre-cast business, which supplies large infrastructure projects, industrial developments and high-rise residential projects.
Meanwhile, diversified investment firm Washington H Soul Pattinson, which owns 44.5 per cent of Brickworks, reported a 61 per cent fall in its profit in the year to July 31 to $143 million.
The result was skewed by a $197 million gain in the previous year from the sale of Arrow Energy shares by coal miner New Hope Corporation.
Washington H Soul Pattinson holds a 60 per cent stake in New Hope and a controlling interest in copper sulphide producer, among numerous other investments.
Chairman Robert Millner told AAP that New Hope would probably produce a lower profit in the current financial year given coal prices were expected to fall and the Australian dollar remains high.
He said Washington H Soul Pattinson was in the process of completing a takeover of copper and gold miner Exco Resources, and was happy to continue holding investments in the mining sector despite a slowdown in the global economy.
“We’re long-term investors,” he said.
“We’ve been through cycles before. I think we’ve probably bought this copper operation from Exco at the right time.”
Shares in Brickworks were steady at $10.04 at 1245 AEST. Washington H Soul Pattinson was 13 cents lower at $12.72.
