The Western Australian housing market is currently in the midst of a cyclical decline in building activity, with detached house approvals down by more than 25% over the past 12 months, and industry forecasts for further declines over the medium term. This decline in activity has led to industry overcapacity and strong competition for sales.
Following the completion of the company’s asset impairment assessment, in accordance with AASB 136, an impairment of goodwill held within Austral Bricks WA, totalling approximately $47 million, will be recognised in Brickworks’ financial year 2016 results. This non cash impairment reflects the significant decline in building activity and strong competition in that state.
One-off costs of around $5 million after tax, primarily in relation to the non cash write-down of assets at Malaga, will be incurred in relation to the restructuring initiatives within Austral Bricks WA.
Auswest Timbers in WA
In February Auswest completed the purchase of the Greenbushes timber mill. This low cost modern mill was purpose built to process smaller sized Jarrah resource. The mill has been recommissioned, with production volume being transferred from the now closed Deanmill site.
One-off costs of around $8 million after tax, including a non cash asset impairment of $6 million due to the write-down of plant and equipment at Deanmill.
Building Products and Property Earnings Update
Brickworks is pleased to re-affirm the trading update released on 9 June, with Building Products underlying EBIT for financial year 2016 to be significantly higher than the prior year and Land and Development underlying EBIT also set to increase.
Mr Partridge said: “Underlying earnings growth in Building Products has accelerated during the second half, on the back of continued strong demand on the east coast, particularly in New South Wales and Victoria, despite the impact of very poor weather conditions in the last quarter of the year”.
Statutory Net Profit After Tax will be subject to final equity accounted results from Washington H. Soul Pattinson, and total significant items expected to be in the range $62-66 million after tax, including those items outlined in this announcement.