Why the Brickworks Ltd Share Price Rose Today

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What does Brickworks Ltd do?

As the name suggests, Brickworks Ltd [ASX:BKW] manufactures bricks, but they also make precast concrete products, roofing tiles, facade systems and timbers.

The company also operates a land development business.

What’s moving the BKW share price?

The company released their half-year results yesterday. Some highlights:

  • Half-year net profit of $75 million up 19%;
  • Earnings per share were up 19%;
  • Interim dividend up 7%;
  • The land and development business posted a 17.3 per cent rise in earnings.

These are solid results. Brickworks managing director Lindsay Partridge says that its facilities are running at full capacity. It’s even importing terracotta roofing tiles and bricks from Spain to meet demand.

The share price was sold down slightly on the news yesterday, but has recovered in trading today.

What now for BKW shares?

The share price is hovering around all-time highs and the company is making record profits. None of this signals a housing collapse. As long as companies like Brickworks continue to make record profits it suggests that the property cycle has some way to go. All that construction implies jobs, and is bullish for companies downstream such as home appliances and furnishings.

You have to be a little cautious if you’re calling for an Australian recession amid all the construction taking place.

If you’re looking for a property collapse, follow the chart of Brickworks. If the share price starts breaking significant monthly lows, it might indicate less demand and softer sales. However, that’s not happening presently.

In fact, the opposite happening is taking place, with the stock threatening to break into all-time new highs. If that should happen, it would be very bullish for BKW’s future.

Of course, this is all in accord with the 18 year real estate cycle. If you want to learn what awaits the economy over the next decade, click here to find out more.

Cheers,

Terence Duffy,

Research Analyst, Cycles, Trends and Forecasts

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