Brickworks confident US expansion will pay off

Brick manufacturer Brickworks (ASX: BKW) is confident that its acquisition of three US brick makers within the space of a year will pay off.

Brickworks managing director Lindsay Partridge told the company’s annual general meeting that with integration complete in 2020, its US businesses would have the scale to materially impact company earnings.

Brickworks has been hit by soft demand in Australia as the economy showed, but the US is growing with favourable government policy, cheap energy and low interest rates creating a stable housing market.

Partridge said: “We have quickly established a strong position, with market share leadership in key states across the architecturally focused Northeast, Midwest and Atlantic regions.

“We are pleased with the performance of the US business over the past 12 months with our initial targets being achieved, and a range of growth initiatives being progressively implemented.”

Earlier this month the company bought Redland Brick, which followed earlier purchases of Sioux City Brick and Glen-Gery.

The combined North American group will operate 12 brick plants and retail outlets, make around 400 million bricks and employ 1,000 people.

Annual turnover is expected to be $290 million.

“Our North American acquisitions have come at an opportune time and will provide a new and significant earnings contribution as the building industry in Australia moves through the current downturn.”

Partridge told the meeting that the first half of this financial year were expected to be the company’s low-point for earnings in Australia

While Western Australia is experiencing difficult market conditions, the company is encouraged by order intake levels which have been rising for the past four months elsewhere.

He said: “If this trend continues, the current downturn is likely to one of the shortest I have experienced in the past 30 years.

“With market fundamentals strong, there is growing evidence that the decline in activity has been caused by the temporary lending restrictions imposed on the banks in response to the Royal Commission.”

Picture: Redland Brick

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