Brickworks managing director Lindsay Partridge says a housing construction slide will come in late 2023

He said Brickworks was currently putting through fresh price rises for its bricks and tiles of about 7 per cent to try to claw back inflation-fuelled price rises in raw materials such as sand and gravel, wage increases and a $7 million jump in electricity costs.

“The inflation bubble is a little bit behind,” he said. Brickworks had already lifted prices in its first half ended January 31 by about 9 per cent on a year-on-year basis.

He said the Reserve Bank of Australia had kept interest rates too low for too long, and had to overcompensate as inflation took off. “They’ve come up too fast for anyone to see what the impact is. That’s why they run the risk of overshooting”.

But Brickworks was still able to lift its first half dividend payout by 4.6 per cent after generating strong profits from its industrial property business. Brickworks will pay a first half dividend of 23¢, up from 22¢ a year ago.

Net profit fell 38.4 per cent to $354 million for the six months ended January 31, with the previous year’s results boosted by one-off gains.

Mr Partridge said electricity costs in the group’s Australian business were expected to double, or by about $7 million on an annualised basis, over the next two years. The company would raise prices to offset those rising energy prices.

He said Australia’s detached housing starts fell 18 per cent in the six months ended January 31 from the year-earlier period. But the delay in use of bricks and tiles on building a house once first construction had begun wa about six months because of tradie shortages, supply chain backlogs and the spike in demand that occurred in the pandemic from the federal government’s HomeBuilder program.

Earnings before interest, tax, depreciation and amortisation from its Australian Building Products arm fell 6 per cent to $50 million, the company said. The group’s US building products business, built up since 2018 through five acquisitions, lifted EBITDA 16 per cent to $14 million.

The company’s property EBITDA rose 26 per cent to $453 million, while the net asset value of property trusts increased by $484 million to $2.24 billion.

Brickworks has a joint venture industrial property trust with Goodman Group, with warehousing for e-commerce companies in high demand. One of the properties is a state-of-the-art Amazon distribution centre at Oakdale West in Sydney.

Brickworks shares gained 42 per cent between mid-June last year and mid-February in a rise to $24.95 from $17.61. Its shares traded 3.3 per cent firmer at $23.790 at 12 noon AEDT.

Macquarie analyst Peter Steyn warned on March 7 that Australia faced “significant pain” in the residential construction sector as rising interest rates and uncertainty pushed down building starts. Official figures show loans for construction of new homes are dropping quickly, and have hit a 15-year-low.

Mr Partridge said the US business still wasn’t performing to expectations, with the company closing the Caledonia site in Ohio as part of an ongoing consolidation of sites. It has cut the number of its operating US brick plants to eight from 16.

Brickworks made its first US acquisition in late 2018 and has expanded with four more purchases in the north-eastern states to have a new growth platform, in part because energy prices are much lower there than in Australia.