Brickworks Limited (ASX: BKW) has announced a post-tax non-cash impairment of AUD 55 million for its North American operations, citing weaker-than-expected market conditions and operational disruptions. The impairment will be reflected in the company’s 1H25 results, due for release on March 20, 2025.
North America Struggles as Market Conditions Deteriorate
At its November 2024 AGM, Brickworks had already flagged concerns about a softening North American market—but the downturn has been sharper than anticipated. A 13% decline in revenue compared to the previous period has forced the company to temporarily shut down some plants, leading to higher production costs and weaker margins.
Other key challenges include:
- Increased competition in the retail segment, leading to a loss of market share at company-owned Brickworks Supply stores.
- Disruptions from plant shutdowns, impacting efficiency and inflating costs.
- Delays in realizing benefits from recent plant upgrades and rationalization efforts.
- Continued economic uncertainty, with labour shortages, rising material costs, and interest rate concerns dampening short-to-medium-term sales forecasts.
1H25 Trading Update: Mixed Performance Across Divisions
Beyond the North American impairment, Brickworks provided an update on its divisional earnings for the first half of FY25:
- Property: EBITDA is expected to improve, mainly due to stable industrial property capitalisation rates (unlike last year’s significant devaluation of Property Trust assets). However, development profits will be minimal as Oakdale East is still in early construction stages.
- Building Products Australia: EBITDA should hold steady, with cost-cutting and portfolio rationalisation offsetting weaker sales volumes.
- Building Products North America: EBITDA will be significantly lower, impacted by market pressures, operational inefficiencies, and extreme winter conditions in key regions.
What’s Next?
While full-year guidance remains uncertain, given that Brickworks’ investment earnings (driven by its 25.65% stake in Washington H. Soul Pattinson) are yet to be finalised, the company is set to release its full 1H25 results on March 20, 2025. Investors will be watching closely for further insights into North America’s recovery prospects and Brickworks’ strategy to navigate the challenging landscape.
