Brickworks (ASX: BKW) has today announced the second major impairment to its North American business in six months, with revenue down 13 per cent year-on-year in the December half as reduced demand led to plant shutdowns to control inventory levels.
The post-tax non-cash impairment charge of $55 million to Brickworks North America follows a $68.8 million charge announced in September, which was revealed alongside a $54.7 million impairment to its Austral Masonry business in Australia.
The North American business brought in earnings of more than $43 million in FY24, representing more than 27 per cent of Brickworks' total EBITDA for the year.
In today's update, the company noted strong retail competition had also resulted in a loss of some market share at the company-owned Brickworks Supply store network, while plant shutdowns caused reduced plant efficiency and higher unit manufacturing costs, which ultimately led to a significant decline in earnings.
In FY24 Brickworks undertook a plant rationalisation program in North America, cutting its number of operating plants down from 16 to eight to create a "more efficient and cost-effective network for future operations".
In its annual report the group reported improved margins in North America, although clarifying that subdued building activity had delayed realising the full benefit of Brickworks' rationalisation activities. The group reiterated this point in today's announcement.
"The subdued building activity and scaled back production will delay the realisation of benefits expected to be delivered from plant rationalisation and upgrades that have been completed in recent years," the company stated.
"In addition, uncertainty around the timing of the market recovery, factors such as labour shortages, elevated material costs, interest rate uncertainty and geopolitical volatility, has resulted in a moderation of the short to medium term outlook for sales activity."
BKW shares were down 8.2 per cent at $23.52 at 12:55pm AEDT, taking them back to levels not seen in almost a year.
Enjoyed this article?
Don't miss out on the knowledge and insights to be gained from our daily news and features.
Subscribe today to unlock unlimited access to in-depth business coverage, expert analysis, and exclusive content across all devices.
Support independent journalism and stay informed with stories that matter to you.
Subscribe now!
Help us deliver quality journalism to you.As a free and independent news site providing daily updates during a period of unprecedented challenges for businesses everywherewe call on your support