@Hands

It is an amazing business in my opinion. The more you look into Brickworks, the more you realise that being a brick manufacturer, seller and distributer is a small portion of what makes Brickworks a valuable business.

Bricks apparently are not that expensive and so they don't make the business that much money so it was an incredibly smart idea for Brickworks to create a foundation of other investments and assets. Their part ownership in Sol Patts gives them diversity and exposure to highly profitable businesses who, through compounding, build the wealth of Brickworks business year after year.

The value of their property and land that they own (for their quarries etc.) is worth a lot of money and if you add that to their Joint Venture with Goodman Group they have set themselves up in a property market that will grow decade after decade.

All these different assets make Brickworks a difficult one to value, however I tend to try to look at the business as an investment company. Separate out the parts of the business into land value, JV with Goodman Group, Australian material business, US materials business, and investment portfolio. That way you can go through and individually value each portion and the sum of all these parts are what give your overall value.

Such a great business for the dividend investor and growth investor. Ticks a lot of boxes and really well run too. The fact that Sol Patts manages a lot of their investments gives me a lot of confidence too. Am a fan of the Millners and their investments over the years.

DISC: Held.

Brickworks to curtail operations as a result of COVID-19 lockdowns.

The restrictions across the country, and in Sydney in particular, are having a considerable affect on Brickworks ability to move product out of their dispatches and sales remain at only 50% of pre-lockdown levels. Therefore, with a number of their storage yards reaching full capacity, they have decided to temporarily curtail production at two of their five brick kilns in NSW, representing 30% of total production capacity.

As part of the multi-day shutdown process, kilns at Punchbowl and Horsley Park Plant 3 were taken off-line over the weekend. Plant 1 at Horsley Park, Bowral and the 2nd kiln at Plant 3 remain operational, with significant production volume being transported south, to meet the continued strong demand in Victoria.

Update to Earnings and Guidance.

• Brickworks expects FY21 EBIT1 from Building Products Australia to finish around 35% higher than FY20.
• In North America, trading in July was slightly softer than their forecast, and this will result in FY21 EBIT being slightly below the prior year.
• Property will deliver a record EBIT result of around $250 million.
• Mr. Lindsay Partridge said: "Due to the lack of visibility of Investment earnings in the second half, which are driven by the Company’s 39.4% shareholding in Washington H. Soul Pattinson, no guidance can be provided in relation to Brickworks’ net profit after tax."
• More detail on the FY2021 result and a further update on trading conditions will be provided at Brickworks’ full year results announcement, on Thursday 23rd September.

My take on things:

I believe these updates in relation to the Australian operations are merely transitory. When the wanted number of people are vaccinated and lockdowns are no longer happening, operations for Brickworks should return to normal, with possibly even a slight tailwind. 

Operations in North America seem to be slightly slower than expected, but as the company looks to aquire more businesses and expand their distribution network, this will only grow. With this in mind I expect a significant increase in North American sales starting within the next 24 months, and this should be reflected in forthcoming reports. 

If Brickworks price pulls back significantly due to these announcements I will be looking to add to my current holdings. There may also be a good buying opportunity when the full year results come out on the 23rd of September, but by then we will probably know more in terms of the covid situation in Australia.

DISC: currently hold.

Brickworks expands direct distribution network with the aquisition of the largest independent brick distributor in the USA.

Brickworks Limited has entered into an agreement to aquire certain assets of Southfield Corporation, including Illinois Brick Company for US$51.1 million (AU$70.0 million).

Illinois Brick Company is the largest independently owned and operated brick distributor in the U.S. with 17 showrooms and outlets across Illinois and Indiana.

Illinois Brick Company has delivered consistent earnings for several years and the aquisition is expected to deliver 2% increase in EPS in the first year.

This is obviously a strong aquisition and perfectly in line with what Brickworks goals are in terms of expansion in North America. Growing their distribution network while leveraging the already successful lines of product they have in Australia and around the world, allows them even more market opportunity in the U.S.

DISC: my first ever stock I bought and still holding it.