Revenue and profit fall in first half with only ‘modest’ improvement expected in second
Brickmaker Forterra said revenue in the first six months of the year slipped nearly one fifth from the same period last time as the housing slump hit its bottom line numbers with the firm adding a recovery in the second half will remain fragile.
In interim results announced this morning, the firm said revenue was down 18% to £183m for the six months to June with pre-tax profit falling 59% to £18m.
New chief executive Neil Ash, who took over from Stephen Harrison three months ago, said: “As we enter the second half, the outlook continues to remain uncertain due to high inflation and rising interest rates. These factors are likely to continue weighing on demand for new housing and therefore our products. So, whilst we presently see tentative signs of improving trading, we are forecasting only a modest improvement in demand in H2.” He added the outlook for 2024 was also unclear.
It said it had mothballed production at its Howley Park brick factory, which is capable of manufacturing around 50 million bricks per annum, as well as reducing production elsewhere, which it said would reduce its annual fixed costs by around £10m.
It said the cost of this move would be £3m and added it was spending a further £1m on a restructuring of commercial and support roles that it announced in a jobs-cutting programme earlier this month which will save a further £3m.
Forterra said it introduced a price hike at the start of the year with brick prices going up by around 5% - although it said it had wanted a 10% rise – and aircrete blocks jumping by 15%.
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Forterra’s new £95m brick factory at Desford in Leicestershire opened in May and will eventually see the firm’s brickwork production rise from 80 million bricks a year to 180 million.
In its 2022 results, the brickmaker reported revenue of £456m, a rise of 23% on the number it posted in 2021, and a pre-tax profit of £73m, up 28% from £57m.
Meanwhile, announcing its interim results yesterday, materials firm Breedon yesterday said the housing slump was also hitting its figures. “The UK economic landscape remains uncertain with limited visibility beyond 2023, particularly with respect to residential housebuilding from which c.20% of our revenues are derived,” it warned.
Revenue was up 11% to £743m in the six months to June but pre-tax profit was down 5% to £56.5m.