Costs of getting capacity back up and running set to hit brickmaker’s profit

Brickmaker Ibstock has warned the cost of bringing capacity back on will hit its profits this year.

In a trading update, the firm said: “We have taken steps to add back productive capacity at several factories in the clay network.

“Whilst this will ensure the Group is well placed to benefit from the recovery as it gathers pace, it has also led to higher than expected incremental fixed costs in the current year, particularly as productivity and operational efficiency ramp up from initial lower levels at these factories.”

In a note, broker Investec said “it would seem the extra costs are c.£5-6m with the pricing impact at c.£6-8m”.

Ibstock said a recovery was underway in its markets with “activity levels well above the prior year period, reflecting increased demand in residential construction markets”.

Investec said it was revising down its pre-tax forecast for the year, adding: “While the news around market volume was very encouraging, the Group has clearly struggled to recover cost inflation and has suffered from higher costs in bringing on more capacity. We have cut out estimates substantially for FY25E.”

It said that it expected pre-tax profit this year to £37.6m, down from last year’s £50.9m, before rising to £57m next year. The broker said it was expecting income this year to £392m, up from last year’s £366m.

The firm will release its half-year results on 6 August.