Demand for Industrial Property Buoys Brickworks

A strong appetite for building materials and industrial properties has laid the foundations for Brickworks’ rapid share price growth.

A positive trading update drove the ASX-listed company’s stock price up more than 11 per cent over the day.

Revaluations in Brickworks’ joint-venture property trust saw its property earnings double in the past year to between $240 million and $260 million, creating record results in underlying earnings before interest and tax.

The property trust with Goodman Group created in 2006 is worth $777 million and includes the construction of an Amazon facility at Oakdale West, NSW to be completed in the next six months.

It also has a larger Coles distribution warehouse nearby, which is expected to be complete within 18 months.

Building material sales in Australia and North America also contributed to the share price rise, although Covid-19 and product availability made profit forecasts less predictable.

In the past 20 years Brickworks has expanded with the acquisition of Bristile in Australia and Glen-Gery, the fourth-largest brick manufacturing company in the United States, as well as its move into masonry, timber and precast manufacturing.

Its building products portfolio is worth $692 million in Australia and $208 million in North America.

Brickworks managing director Lindsay Partridge said land prices and the completion of the two distribution facilities should bolster future results.

“Since the end of the first half, there has been a number of significant industrial property transactions in western Sydney,” Partridge said.

“The pricing of these transactions has reinforced the strong investor appetite for prime industrial property assets.

“We have seen strong demand and sustained growth in the value of our property trust over a number of years.

“The Covid-19 pandemic has only fuelled this growth, by accelerating industry trends towards online shopping and increasing the importance of well-located distribution hubs and sophisticated supply chain solutions.”

However, the forecast for building products was less predictable but was expected to exceed the previous year which incurred “significant write-back costs” due to the pandemic.

“In Australia, the significant uptick in housing approvals is now translating to increased building activity, with our sales particularly strong in Queensland and Western Australia over recent months,” Partridge said.

“That said, the availability of some materials, such as timber for house trusses, is an issue in some areas, with the resultant delays likely to flatten and extend the duration of the existing pipeline of work.”

Partridge said building activity was also ramping up in the United States as the vaccination program advanced.