Brickworks’ 2H25: $65M Property Gain vs. $75M North America Impairment
Brickworks Limited reports a mixed second half of FY25 with strong property gains offset by a significant impairment in its North American operations, while its planned merger with Soul Patts remains on track.
- Property division EBITDA expected to rise due to revaluation gains and development profits
- Building Products Australia shows slight EBITDA improvement in 2H25
- Building Products North America faces subdued market conditions leading to a $75 million post-tax impairment
- Full year NPAT guidance withheld pending finalisation of investment earnings from Soul Patts stake
- Proposed merger with Soul Patts remains unaffected by current trading update
Property Division Strengthens Earnings
Brickworks Limited has provided a trading update for the second half of fiscal year 2025, highlighting a robust performance in its property division. The Industrial Property Trust is expected to deliver a $65 million revaluation gain, driven by a moderate compression of capitalisation rates. This, combined with development profits from projects such as Oakdale East Stage 2, is anticipated to push property EBITDA above first half levels, underscoring the division's resilience amid broader market uncertainties.
Building Products Australia Shows Modest Growth
The Australian building products segment is forecast to post a slight improvement in EBITDA for the second half, reflecting stable demand and operational efficiencies. This steady performance contrasts with the challenges faced overseas and provides a degree of balance within Brickworks’ diversified portfolio.
North American Market Pressures Trigger Significant Impairment
In stark contrast, Brickworks’ North American operations are contending with a notably subdued market environment. Elevated interest rates, high construction costs, and dampened consumer confidence have led to a softer-than-expected trading period. These factors have compelled the company to anticipate a non-cash impairment charge of approximately A$75 million post-tax (A$102 million pre-tax) against its North American assets. This impairment reflects the diminished earnings outlook and underutilisation of manufacturing capacity, which has eroded cost efficiency and margins.
Full Year Profit Guidance Pending Investment Earnings
Brickworks has withheld guidance on its full year net profit after tax (NPAT) until the finalisation of investment earnings from its 25.64% stake in Washington H. Soul Pattinson and Company Limited (Soul Patts). This investment has historically provided stable returns and dividend growth, adding a layer of complexity to the company’s overall earnings picture for FY25.
Merger with Soul Patts Unaffected
Importantly, Brickworks confirmed that the trading update does not impact its proposed transformative merger with Soul Patts, announced earlier in June 2025. This strategic move aims to consolidate their complementary assets and investment portfolios, potentially unlocking long-term value for shareholders despite near-term operational headwinds.
Bottom Line?
Brickworks’ mixed 2H25 results set the stage for a pivotal FY25 close, with market watchers eyeing the final audit and merger progress closely.
Questions in the middle?
- How will the $75 million impairment affect Brickworks’ valuation and investor sentiment?
- What is the timeline and regulatory outlook for the proposed merger with Soul Patts?
- Can North American market conditions improve sufficiently to reverse margin pressures in FY26?
