Forterra Plans to Mothball Factory Amid Plummeting Turnover

FORTERRA PLC, a UK manufacturer of clay and concrete building products, has announced a 24% drop in revenue in a trading update for the four-month period ending 30 April 2023.

Alongside its plummeting turnover, Forterra also reports it is consulting on temporarily reducing production, including the mothballing of its Howley Park brick factory to save £10m in costs.

The plunge in turnover produced profit before tax of £109m down from 2022’s figure of £143m. The company reports an underlying fall in full year market demand of 20% relative to 2022.

However, it reports its cost base is stabilising, set against persisting inflation in certain categories. For the rest of the year, approximately 80% of the business’s energy requirements have been secured, albeit at higher rates than previously.

Market Outlook

Forterra says it expects market conditions to improve as the year progresses, despite industry brick despatches falling by 32% relative to the prior year in the three months to the end of March. The company says it believes the levels of inventory reduction within its customer base have been a major factor in its performance this year and expect this to ease going forward.

Meanwhile, brick imports have begun to fall sharply, reducing by 45% relative to 2022 in the three months to the end of March. Nevertheless, the firm says improving housebuilder reservation rates provide cause for optimism and an improving outlook for H2 2023 and into 2024, with full year results expected to be weighted towards H2 reflecting the anticipated improvement in market conditions then.

Neil Ash, Chief Executive of Forterra plc

Neil Ash, Chief Executive of Forterra plc, said: “Trading conditions in the period have been challenging and we are therefore pleased to deliver a result in line with our expectations.

“We believe the Group is well placed to meet the short-term challenges we face and remain confident in the medium to long-term fundamentals of our markets. This confidence is underpinned by a longstanding shortage of housing supply, the strong cross-party political support for housebuilding and a long-term deficit of domestic brick production capacity.

“Subject to market conditions improving in line with our projections we continue to anticipate delivering a full year result in line with our expectations with the result weighted towards H2.”

New Brick Factory

Production at the new Desford brick factory, which formally opens on 17th May 2023 continues to ramp up while the old factory ceased production in March. With the new factory becoming operational at a time of subdued demand, disciplined capacity management is key, the company reports.

Subject to approval at Forterra’s AGM next week, it expects to pay a final 2022 dividend of 10.1 pence per share on 7 July to shareholders.


>> Read more about Forterra in the news

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