Forterra confident despite challenging trading conditions

11th Nov 2024 11:12

(Sharecast News) - Clay and concrete building products manufacturer Forterra reported challenging trading conditions for the four months to the end of October on Monday.

The London-listed firm said that while brick despatches remained steady compared to the prior year, demand for concrete products improved.

Year-to-date revenues were down 5% from 2023, though the group said it maintained pricing discipline and cost control, resulting in adjusted EBITDA that aligned with the board's expectations, holding at approximately £50m for the full year.

The group's strategic investments were reportedly advancing as planned.

Forterra said it had started commissioning its new £12m brick slip facility in Accrington, which is the UK's first large-scale domestic facility capable of producing 50 million brick slips annually.

Additionally, the refurbishment of the Wilnecote brick factory was on track, with commissioning set for early next year.

Once operational, Wilnecote would supply a broader range of high-quality bricks tailored to the premium commercial market, positioning Forterra well within the lucrative segment.

Despite recent market challenges, Forterra said it had ample inventory to meet customer demand and could scale production with minimal additional investment.

The company said it had also initiated increased output of certain concrete products to meet rising demand.

Looking to 2025, Forterra anticipated moderate cost inflation, including the impact of the upcoming increase in Employers' National Insurance contributions.

With 80% of its energy requirements secured for next year and strong coverage for subsequent years, Forterra had announced price increases for 2025 and said it was in discussions with customers regarding those adjustments.

Forterra said it remained optimistic about the future, supported by government initiatives aimed at increasing housing supply and the potential impact of lower interest rates on affordability.

The company's recent £140m strategic investment had boosted its brick manufacturing capacity by 15%, enhancing both production efficiency and its positioning for an anticipated market recovery.

"The group has delivered a solid performance since June and, despite trading conditions remaining challenging throughout the period, the board maintains its full year expectations for the year," said chief executive officer Neil Ash.

"Our strategic investments in Desford, Wilnecote and Accrington address previous capacity constraints and provide us with improved efficiency relative to the last turn of the cycle.

"Assuming a return to market conditions seen in 2022, the investment in new capacity has created an enlarged group capable of delivering EBITDA of approximately £120m in the mid-term."

Ash said the board was "encouraged" by the new government's policies that aimed to deliver a significant increase in housing supply, and also from improving affordability as the benefits of reducing interest rates were felt.

"Overall, we believe we are well positioned to benefit from an improving market outlook."

At 1045 GMT, shares in Forterra were up 0.26% at 188.48p.

Reporting by Josh White for Sharecast.com.