Australian residential building activity is nearing the bottom of the cycle and expected to lift in coming months, according to key industry players.
Building products supplier Brickworks made the prediction after the company recently posted a more than 50 per cent fall in half-year profit, which was put down to the state of the home building market.
The group also signalled that earnings would be lower for the full year compared to the previous corresponding period, despite an anticipated recovery in the next six months.
The company’s managing director Lindsay Partridge pointed out that historically, a fall in interest rates should lead to a turnaround in building activity. He predicted a recovery in housing construction activity the next six months, improving further in years ahead.
The press release to the stock exchange in late March noted Brickworks chairman Robert Millner said: "The latest six months has been difficult, particularly for the Building Products Group, with the convergence of extremely challenging market conditions and significant restructuring activities.
The Building Products Group achieved earnings before interest and taxes (EBIT) of $14.4 million for the half year ended 31 January 2012, down 35.6 per cent compared to $22.4 million from the previous corresponding period.
As foreshadowed at the company's AGM in November, this result reflects the further deterioration of housing activity during the half, with approvals for the six months to 31 January 2012 down 17.0% on the previous corresponding period. In addition, plant closures and restructuring activities across the Group resulted in a significant increase in per unit manufacturing costs.
During the half, operations were consolidated to one site in both the Austral Bricks Queensland and Austral Bricks Victoria divisions, significantly simplifying these operations.
The strong momentum of Austral Precast continued, with earnings and revenue increasing compared to the prior corresponding period. Plant upgrades completed last year in Western Australia have begun to deliver improved results and the installation of a concrete batching plant at Wetherill Park in Sydney has commenced, to enable 24 hour operation of this facility.
The Auswest Timbers division completed the acquisition of Gunns Western Australian Jarrah assets for $6.0 million in December 2011, delivering substantial synergies to existing operations in this state, and creating a market-leading range of high quality Australian hardwood timber.
