County brick makers at full production as construction booms
IBSTOCK AND FORTERRA SAY BUSINESS PICKED UP STRONGLY
BRITAIN’S two biggest brickmakers say they are back at full production capacity following the big hit taken when the country ground to a halt early in 2020.
A year-and-a-half ago, Ibstock and Forterra were forced to shut their plants and put medium-term plans on hold as the country tried to work out how the economy could withstand mass lockdowns.
Both Ibstock and Forterra had to reassure investors they had enough cash to see them through the enforced downturn as building companies closed their sites. Redundancies were also announced.
Now, as the country starts getting back to some sort of normality, both companies have said business has picked up strongly, and looks set to stay that way.
Forterra – which is building Europe’s biggest brick factory in Desford – has about a third of the UK brick market and a third of the aerated concrete block market, making it the second biggest brick maker in Britain behind the Ibstock group, based just up the road in north west Leicestershire.
Ibstock chief executive Joe Hudson said management felt confident to be investing in the business again.
He said: “We delivered a strong performance for the first half, supported by the UK construction sector’s continued recovery from the period of peak pandemic impact.
“Underlying market fundamentals remained robust, backed by demand for new housing, and we have captured the benefits of last year’s restructuring and refocused on growth opportunities. The £60 million investment in the redevelopment of our clay brick facilities in the West Midlands will expand our capacity significantly from early 2024, consolidating our leadership position in the clay brick market.
“It will also demonstrate our commitment to leading our industry on sustainability issues, producing the UK’s first net-zero carbon bricks, an innovation that is already generating significant customer interest.”
Stephen Harrison is chief executive of Forterra, which is going ahead with a £27 million investment into its 30-year-old Staffordshire brick factory, near Tamworth, which will boost productivity there by 20 per cent.
He said: “We saw a strong recovery over 2020 in the first half, which exceeded our expectations.
“This performance, primarily in bricks and blocks, was underpinned by robust demand across both the new build and RM&I (repair, maintenance and improvements) markets.
“Overall, group revenue increased by 47 per cent over 2020 and, notably, revenue in bricks and blocks was slightly ahead of 2019 levels.
“The current strong trading conditions appear set to continue in the second half of the year with our customer base signalling that they expect current levels of demand to continue.
“However, we remain watchful that ongoing economic uncertainty surrounding the longer-term impacts of the pandemic, coupled with the shorter-term effects of the present shortages of labour, materials and transport across the wider sector, could potentially impact demand for our
products. While we anticipate that the result for the full year will be weighted towards the first half reflecting the timing of maintenance shutdowns, the impact of cost inflation and nearterm labour and material shortages in the second half, we now anticipate a 2021 full-year result modestly ahead of our previous expectations.”
The Ibstock figures:
Sales for the last six months were back to pre-Covid levels at £202 million as its construction clients tried to get on top of pent-up demand for newbuilds.
The business made a pre-tax profit of £39 million in the first half of 2021 – again similar to the first six months of 2019. By contrast, in the first six months of last year it made losses of £52 million.
Ibstock said it had benefited from restructuring and good overall cost management brought in after the pandemic hit and the UK market now looked sound – underpinned by strong housing demand and good mortgage availability.
It said trade was also being helped by homeowners feeling confident enough to spend money on their properties and it had handled well the impact of tougher supply chain conditions. As the summer progresses, it said, demand has remained “robust”, though supply chain challenges “principally relating to freight availability and the impact of Covid constraints on factory labour” had become more evident.
We saw a strong recovery over 2020 in the first half, which exceeded our expectations
Stephen Harrison, left, Forterra
The Forterra figures:
In the first half of 2021 Forterra reported sales of just over £180 million – down on the £193.6 million reported pre-pandemic in the first half of 2019, but almost 50 per cent up on the first six months of 2020.
Pre-tax profits were £27.1 million for the half, compared with losses of £2.3 million in the first half of 2020, but down more than £5 million on the first half of 2019.
The business said it had seen a strong recovery in trading and the latest profits were a sign of success, taking into account “operational challenges” and investment in the Desford factory, which is set to open in late 2022.
Cashflow was also strong, with the positive trading outlook expected to continue.
It said: “The board remains positive about the fundamentals relating to the housing market driven by structural undersupply and supportive government policy.”