Results for the six months to June 30 2012 show a pre-tax loss of £84,000 from a £105,000 profit last time on turnover down to £11.9m from £12.2m.
The profit warning came as Michelmersh bosses fear that the traditionally stronger second half of the year will only lead to the company breaking even for the full year.
Chairman Eric Gadsen said: “Our business model has been based for some time now on a flat market, focused on the South East of England, with funding constraining demand despite the many Government initiatives to attempt to arrest these conditions.
“We can survive in these conditions and will thrive when conditions improve.”
Michelmersh saw its selling price per thousand of its specialist bricks rise to £355 from £336 compared to an industry average of £229.
Gadsen said: “We have noted on previous occasions that construction material prices have increased by 25% since 2007 whereas brick prices have increased by only 8%.
“At some point there will be a return to normalised return on capital.
“The negative economic sentiment since the spring will continue to put pressure on the volume manufacturers in a market where surplus stocks have been reducing.”