Building materials supplier Brickworks expects its energy costs to increase by $20 million a year by 2019, and has installed its own on-site generators in South Australia as a safeguard against an uncertain supply.
Brickworks remains concerned about the price and reliability of energy, with new gas and electricity contracts to take effect at its operations on Australia's east coast from January 1 and an additional gas price increase to follow 12 months later.
"Gas and electricity price increases will add around $20 million per annum to Brickworks' manufacturing costs by 2019," Brickworks managing director Lindsay Partridge said on Thursday.
Mr Partridge said Brickworks is investigating options to help mitigate the higher costs, including investing in new fuel-efficient kilns, using alternative fuel sources, increasing imports and manufacturing offshore.
But the unreliability of energy supply is more concerning than rising prices.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
"Our operations continue to experience unexpected outages, and face the prospect of blackouts and forced load-sharing arrangements," Mr Partridge said.
"In South Australia, we have been forced to invest $1.5 million in generators as back-up to ensure the continued operations of this facility."
Brickworks has more than doubled its full-year net profit to $186.2 million as land sales and increased investment earnings helped the group meet its guidance.
Underlying net profit, which excludes significant items, for the year to July 31 jumped 34 per cent to $196.4 million.
Earnings in the group's building products division fell 13.7 per cent as strong residential building activity in east coast markets was offset by a 22 per cent drop in building starts in Western Australia.
Brickworks said significant restructuring activities in WA, including plant closures and job cuts, had positioned the business to deliver improved results in that state - despite an expectation of continued difficult conditions.
Brickworks said year-to-date earnings within the building products division are tracking higher than the previous corresponding period, and the group remains positive about the short- to medium-term outlook.
Shares in Brickworks were 17 cents, or 1.22 per cent, lower at $13.81 at 1432 AEST.
BRICKWORKS FY PROFIT DOUBLES
* Net profit of $186.2m vs $78.2m
* Revenue up 12pct to $841.8m
* Final dividend up 2.0 cents to 34 cents, fully franked
