Shares of Brickworks Limited (AU:BKW) fell nearly 2% today after the company released an update announcing a non-cash impairment charge of $172.4 million (pre-tax). The company announced that following an asset review, it has recognized this impairment charge in its FY24 results, which will be released later this month.
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Brickworks is a manufacturer that specializes in building products for both residential and commercial markets.
Brickworks Faces Impairment Charges
Brickworks’ impairment charges include $78.1 million before tax for its Austral Masonry segment and $94.3 million for the Brickworks North America division.
For Austral Masonry, the impairment charge reflects a rapid decline in multi-residential building activity during the second half of FY24. Moreover, June commencements across Australia are expected to be at their lowest in over a decade. Additionally, the company highlighted that rising costs, including land tax and raw materials, have not yet been fully offset by recent price hikes.
Meanwhile, for Brickworks North America, the impairment charge is attributed to a weakened short- to medium-term outlook for non-residential building in key markets such as the Northeast and Midwest regions of the U.S. Lastly, intense competition, especially in the single-family housing sector, has led to pricing and volume pressures in certain regional markets.
Is Brickworks a Good Buy?
In terms of share price growth, Brickworks could provide an interesting opportunity due to its diversified and strong asset base, including property and other investments. Moreover, the strong population growth in both the U.S. and Australia could boost the demand once interest rates decline.
According to TipRanks, BKW stock has received a Hold consensus rating based on three Hold recommendations. The Brickworks share price forecast stands at AU$29.10, which shows 14.4% upside potential in the shares.
