Washington H. Soul Pattinson and Co (ASX:SOL): Australia’s closest comparable company to Berkshire Hathaway

There can only be one Berkshire Hathaway, but the closest company to it is Washington H. Soul Pattinson and Co (ASX:SOL). Sure, there are investment houses out there, but few lack the track record and history of this company. Last year, however, saw one of its boldest moves in decades in merging with Brickworks (ASX:BKW).

We’ll have a fair idea of how it is going towards the end of March when it releases its 1H26 results, although the merger was enough to add the company to the ASX 50. But we have some concern that being one entity will mean that Soul Pattinson will be more exposed than it was before. 

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Introduction to Soul Pattinson

Soul Pattinson had humble ancestry as a pharmacy store in the 1870s, but the modern company was founded in 1902 when Lewy Pattinson bought out father & son founders Caleb & Washington Soul. It was listed on the Sydney Stock Exchange a year later and claims to be the second oldest company on the bourse.

As we mentioned, it is an investment company owning stakes in several businesses, most notably it held over 40% of Brickworks (ASX: BKW) until the merger. This was a legacy of the mid 20th century where so many listed companies had cross shareholdings in each other. Other assets that belonged to the group included a 12.6% stake in TPG (ASX: TPG), a 25.4% stake in Tuas (ASX: TUA) and a 40% stake in coal miner New Hope (ASX: NHC).

Soul Pattinson also has a significant portfolio of private assets which you may hear media reports about from time to time. Some of its investments in recent years include body composition scanning business Evolt360, Pillar Performance – a sports supplement business run by former Waratahs player Damien Fitzpatrick.

One of SOL’s more prominent investments was acquiring Milton Corporation in late 2021. It had previously owned the business in part but acquired the balance that it did not yet own. Since that acquisition was completed, Soul Pattinson reported NAV increased by 13.5% per annum including the reinvestment of dividends. This was 6.4% better than the All Ordinaries Accumulation Index.

Its results weren’t spectacular in FY25, but not to be snuffed at either

Soul Pattinson follows a August 1-July 31 financial year. The company made $954.6m revenue, up 15%. Its underlying profit was $491m, up 1%, although its statutory profit was $364.2m and this was down 27%. More on this shortly

It paid 99c per share in dividends, amounting to $364.2m. That was not the highest yield considering its share price is over $30, but some investors may be pleased with the raw amount per share even if it is low-yielding. Similar to Berkshire Hathaway…it helps when you never raise capital or do stock splits! What’s more is that it was able to increase its dividends at a CAGR of 15.3% in the last 3 years, whilst the All Ords average is 0.9%.

Although an equivalent figure was not released for FY25 due to the merger, SOL has reported Total Shareholder Return of 11.7% per annum over the 20 years, outperforming the All Ords by 3%. If you’d invested A$1,000 in the company in 2004, you would’ve ended up with $9,200 whilst would have had just $5,340 if you invested in an All Ords ETF.

While it did now blow its trumpet, this was the 25th year it raised it dividend formally minting it as a Dividend Aristocrat! It has also reported paying dividends for over 120 years, even through the worst wars and economic downturns of the past century.

For ESG investors, you are covered too. The company has had an 80-year partnership with the Royal Flying Doctor Service and chips in over $700,000 a year. It has recently established partnerships with the Black Dog Institute and the George Institute. It recently introduced volunteer paid leave for its staff seeking to help out.

Brickworks dragged Soul Pattinson down…a sign of things to come?

The reason for the drop in statutory profit lies in Soul Pattinson’s portfolio where it has 7 portfolio segments and 2 of these reported losses – private equity lost $35.9m and inter-segment lost $109m. In the year prior, PE made a $1.8m profit and inter-segment lost $5.9m.

The best was ‘strategic’ that saw a $236.1m profit followed by credit that gained $130.5m. Strategic includes companies like Brickworks and Tuas and impairments led to the loss. The intersegment portfolio represents unallocated cost, tax and net financing expenses incurred in supporting the broader portfolio. Now, not all of this was Brickworks, but it’d be fair to assume this was a lot of it because it was a high proportion of the portfolio and because Brickworks was hit by issues impacting the construction sector.

Let’s look at Brickworks’ results. In one sense they were positive as the company returned to profitability. After recording a $118m loss in FY24, it made a $30m profit. But…it is well off the >$800m profit made in FY22. And the company’s profit was boosted by non-cash revaluations within its owned properties.

Looking to its core operations, its building products business in Australia saw a 4% improvement in EBITDA, but its North American business saw just $3m EBITDA, down from $53m the year before – excluding property sales. This is a margin of just 0.8% considering $408m revenue which was down 8%. Although the US is still in a rate easing cycle, rates are still higher than the pandemic and people who locked in low rates have little to no incentive to move.

Analysts confident with the top line, but not the bottom line

Now, of course the company will record higher revenue in FY26 just by being one. Consensus expects a jump from $954m to $2.3bn. But the bottom line could go backwards – analysts expect $0.92 EPS which would be a $349.3m profit on an underlying basis, backwards from FY26.

FY27 is expected to see $2.37bn and a $364.5m profit. Nonetheless, they expect modest share price growth with $39.08 tipped in the next 12 months, up from $37.84 now. The company’s P/E is over 40x for FY26 and FY27 while its EV/EBITDA is over 21x.

Conclusion

Few other companies have such a track record as Sol Pattinson. You could argue it still has upside, having performed well when financial market conditions have not been ideal. But it is not cheap, and being one company with Brickworks means it will be a lot more exposed to the troubles plaguing the construction sector.

An earlier version of this article, written when a merger was nothing more than a pipe dream concluded with the words: Expect good things from this one! Now, we are not so sure.