Lindsay Partridge, managing director of Sydney-based Brickworks, the country’s largest brick and tile manufacturer, was perhaps the most vocal critic of the carbon tax, regularly claiming it would ruin businesses, especially energy intensive operations such as his. Business would be forced offshore and unemployment would rise. And to back his concern, Brickworks donated a quarter of a million dollars to the Liberal Party, and lobbied to get questions asked in federal Parliament critical of the tax.
Lindsay and the rest of the denialists in business and in the federal government got what they wanted — the carbon tax is gone and the quarter of a million bucks in donations was well spent. But the 2013-14 annual results from Brickworks tell a completely different story — that Brickworks’ business was not hurt by the carbon tax, and in fact thrived despite it, with the company giving its shareholders (including the powerful Millner family of Sydney) some of their best returns in 15 years.
The report has exposed Lindsay’s opposition to the carbon tax, and opposition from the Prime Minister and others, for what they were — a lot of emotional hot air, and about as credible as fairy floss.
Brickworks lifted its net profit after tax by 20.7% to $102.8 million, thanks to a 37% jump in earnings from the bricks and tiles business (the Building Products Group), the one that was supposed to have been crippled by the carbon tax. And the company says it’s facing a big improvement in the coming year — not because of the abolition of the carbon tax, but because of the booming home building industry.
“The first half of financial year 2015 is likely to be the strongest market for more than a decade [for the Building Products Group], with many customers reporting order banks that extend for up to a year,” Partridge said in an outlook commentary in the results. And though the tax is no longer with us, Lindsay’s business continued to be bedevilled by a far more credible threat — rising gas prices. Partridge moaned:
“Despite the removal of the carbon tax, Brickworks continues to face pressure from increasing gas prices, up by more than 100% over the past 6 years. With energy prices representing almost 20% of the cost of bricks, this impact has contributed to a reduction in Building Products margins to unacceptable levels. This is despite Brickworks’ significant capital investment in a range of energy reduction and alternative fuels projects to minimise the impact.”
Rising gas prices have nothing to do with the impact of the carbon tax — it’s all down to regulatory approvals based on the claimed impact of world prices as export gas projects in Queensland move towards completion. To counter that, Lindsay, in his usual style, has joined the gang of protectionists, wanting governments to reserve gas from the export market and sell it to Brickworks and other companies at subsidised prices.
It was so concerned about the impact of the carbon tax, Partridge’s company pushed through a price rise (that’s right, a rise, not a cut) on July 1. Yep, Lindsay replaced the carbon tax (which lifted prices generally by 0.7% at best, according to federal Treasury estimates) with a price rise, the size of which Lindsay and Brickworks were too coy to reveal.
“To restore margins to acceptable levels all divisions will implement price increases as and when necessary during the year, with Austral Bricks having implemented a price rise effective 1 July 2014,” the company said in yesterday’s results report.
And finally, there was the ultimate recognition of how little the carbon tax impacted Brickworks’ business, how well the company has performed and how well shareholders have done.
The company’s directors increased the final dividend by 1 cent a share to 28 cents fully franked. This follows a 0.5 cents increase in the interim dividend and takes the full year dividend to 42 cents fully franked. That will help its 43% owned partner, Washington H Soul Pattinson, which in turn owns roughly the same of Brickworks. Both companies are dominated by Sydney’s Millner family, who are determinedly pro-Liberal and therefore have supported everything Lindsay has done at Brickworks — from his moaning and groaning about the carbon tax to the sneaky July 1 price rise, and of course the $384,000 donation to the Liberal Party. Robert Millner is chairman of both companies.
But there two telling financial metrics that reveal the nature of the anti-tax campaign from Brickworks and its managing director. Firstly, Brickworks said its “return on equity for the twelve months to 31 July 2014 was 5.7%, up from 5.0% in the prior year”. And the other was what’s called total shareholder return:
“Brickworks’ continues to outperform the All Ordinaries Accumulation Index in terms of Total Shareholder Return (‘TSR’) over most time horizons. TSR for the year to 31 July 2014 was 20.3%, compared to the All Ordinaries Accumulation Index of 16.6%. Over 15 years, Brickworks has delivered returns of 12.5% p.a., compared to index returns of 8.7% p.a.”
In other words, so well did Brickworks do — throughout the carbon tax and all in 2013-14 — that its total shareholder return was a fat 20%, and that easily outperformed the company’s performance over the past 15 years.
“Brickworks – manufacturers of specious anti-Left rhetoric”?
Brickworks was not the only company to prosper during the period of the carbon tax – AGL was another.