Brick giant to mothball plant as housing demand drops

Grant Prior 1 year ago
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Forterra is cutting production as housing work stutters including the mothballing of its Howley Park brick factory.

The cost-cutting programme was confirmed in a trading update on the eve of Forterra opening its new £95m Desford brick factory.

The company said: “With the new factory becoming operational at a time of subdued demand, disciplined capacity management is key to our ongoing success and we are presently consulting on measures to temporarily reduce our production, including the mothballing of our Howley Park brick factory.

“These measures are expected to deliver an annualised fixed cost reduction of approximately £10m. Beyond this, we will continue to ensure our cost base, including Group overhead, is aligned to market conditions.”

The update revealed a 24% drop in revenue for the four-month period ending 30 April 2023 to £109m from £143m last time as demand slumped in the housing sector.

Forterra increased prices four times in the 12 months to January 2023 including a 16.5% hike last October.

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.

“Our expectations for the year are based upon an underlying fall in market demand of 20% relative to 2022. With the inventory reduction within our customer base still ongoing, the decline in demand we have seen in the period is greater than 20%.

“However, we do expect demand will improve as the year progresses, noting the improving conditions cited by the housebuilders over recent weeks.

“We have already taken proactive steps to manage our production capacity and cost base, as we seek to maximise the benefits of the new Desford factory and the industry leading efficiencies it will provide.

“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.”

 

 

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