Brickworks Limited, one of Australia’s largest brick makers, has been hit by three-quarter increase in its power bill.
And the company, which has been making bricks in Australia for more than a century, is looking at moving offshore because of rising energy costs caused by tight supply of natural gas on the domestic market.
A short time ago, Brickworks shares were up 4.5% to $13.67.
Prime minister Malcolm Turnbull has called an urgent meeting of big gas producers to try to avert an eastern coast energy crisis.
Today Brickworks made a statement to the ASX, saying it had to agree to a 76% price increase during recent gas contract negotiations to secure supply until the end of 2019.
“We never thought that after 108 years of making bricks in Australia, we would now need to investigate manufacturing overseas,” says cChairman Robert Millner.
The company says reliable and cost effective gas and electricity is critical to its operations, particularly the Austral Bricks unit where energy costs represent almost 30% of non-labour costs.
Brickworks says it will end up paying an extra $20 million a year in energy costs by 2019. This represents a more than 25% of the company’s building products division earnings in 2016.
The company is investigating a range of strategies including new fuel efficient kilns, the use of alternative fuel sources, increasing imports and offshore manufacturing.
“Following repeated warnings from industry over many years, it is now obvious that government has failed to develop an effective policy to address domestic energy supply,” says Millner.
“Frustratingly, some governments seem intent on exacerbating the issue, even if that means the lights will go out in houses and factories across the country.
“Exporting our gas is not just putting at risk the jobs of 2000 to 3000 brick makers in Australia, but also the more than 25,000 bricklayers that rely on an uninterrupted supply of products, not to mention the flow on effect in relation to housing supply.”
Brickworks, which employs 1490 people, is due to release its half year results next week.
Last year its revenue was $750.98 million and its net profit after tax was flat at $78.19 million. Underlying profit, before significant items was $147.1 million, up 22.3%.