REG - Forterra plc - 2023 Trading Update

ForterraAnnouncement

24/01/2024 07:15

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RNS Number : 6815A  Forterra plc  24 January 2024

24 January 2024

FORTERRA PLC

 

2023 Trading Update

 

Adjusted EBITDA expected to be slightly ahead of the Board's previous
expectations

 

Forterra plc (the 'Group'), a leading UK manufacturer of essential clay and
concrete building products, provides its trading update for the year ended 31
December 2023.

 

Trading

 

·    Full year revenue totalled c.£345m (2022: £455m), a year-on-year
reduction of c.24%, with the impact of falling sales volumes partially offset
by pricing benefits.

 

·    Despite weak demand, pricing across our range of products remains
resilient with modest 2024 price increases recently communicated.

 

·    Figures published by the Department of Business and Trade highlight
that UK brick despatches in the three-month period to November were 33% lower
than the equivalent period in 2022, taking the cumulative YTD reduction to
approximately 30%. As highlighted previously, our own despatches fell by a
greater percentage driven by our exposure to volume housebuilding which
suffered the greatest impact from rising interest rates.

 

·    Despite continued challenging market conditions we expect to report
full year adjusted EBITDA slightly ahead of the Board's expectations.

 

Management Actions

 

·    Strong management actions during the year will deliver annualised
fixed costs savings in excess of £20m with around £6m realised in 2023 with
the balance in 2024.  One-off cash restructuring costs are expected to total
£9m of which £4m will be paid in 2024.

 

·    Faced with increasing inventory levels, we made further reductions to
production during the second half of 2023 which, assuming 2024 demand remains
consistent with 2023, will ensure output is aligned with sales.

 

·    Production has been reduced through the mothballing of factories,
shift reductions and production breaks. In addition, we have delivered further
savings through restructuring commercial and back-office functions.

 

·    These temporary reductions will not impact our ability to respond
quickly when our markets recover, with the new Desford brick factory also
providing us with a significant capacity uplift.

 

Balance Sheet

 

·    Reflecting our inventory build, capital expenditure and the
management actions taken during 2023, year-end net debt before leases is
expected to be c.£95m.

 

Outlook

 

·    The outlook for our industry remains subject to considerable
uncertainty and, with a general election expected in 2024, demand is
anticipated to remain subdued in the near term.

 

·    However, with the long term under supply of housing in the UK
continuing to worsen, and UK brick despatches now running at levels last seen
in 2009, the Board remains confident in the Group's ability to benefit as our
key markets recover.

 

·    Recent reductions in mortgage interest rates will improve the
affordability of new homes, thus increasing demand for our products.

 

·    The Group intends to announce its FY23 results on 26 March 2024.

 

 

ENQUIRIES

 Forterra plc                         +44 1604 707 600
 Neil Ash, Chief Executive Officer
 Ben Guyatt, Chief Financial Officer

 FTI Consulting                       +44 203 727 1340
 Richard Mountain / Nick Hasell

 

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