REG - Forterra plc - Pre-AGM trading update

ForterraAnnouncement

16/05/2023 07:00

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RNS Number : 4653Z  Forterra plc  16 May 2023

16 May 2023

 

FORTERRA PLC

 

Pre-AGM trading update

 

YTD result in line with expectations despite challenging trading conditions

 

Ahead of a capital markets event coinciding with the formal opening of the new
Desford brick factory tomorrow and in advance of our AGM on 23 May, Forterra
plc (the 'Group'), a leading UK manufacturer of essential clay and concrete
building products, provides this trading update for the four-month period
ending 30 April 2023 (the 'period').

 

Results

 

·    Profit before tax in the period was in line with management's
expectations with revenue for the period of £109m a decrease of 24% on the
prior year (2022: £143m)

·    Cost base stabilising, however inflation persists in certain
categories in line with expectations

·    Approximately 80% of YTE energy requirements secured, albeit at
higher rates than 2022 due to the expiry of historic forward purchases made at
advantageous rates

 

Market backdrop and outlook

 

·    Our expectations for the year remain unchanged based upon an
underlying fall in full year market demand of 20% relative to 2022

·    Whilst industry brick despatches fell 32% relative to the prior year
in the three months to the end of March, we continue to expect market
conditions to improve as the year progresses

·    We believe the levels of inventory reduction within our customer base
have been a major factor in our YTD performance and expect this to ease going
forward

·    Brick imports have begun to fall sharply, reducing by 45% relative to
2022 in the three months to the end of March

·    Improving housebuilder reservation rates provide cause for optimism
and an improving outlook for H2 2023 and into 2024

·    The result for the full year will be weighted towards H2 reflecting
the anticipated improvement in market conditions

 

 

Capacity Management

 

·    Production at the new Desford brick factory continues to ramp up and
the old factory ceased production as planned at the end of March

·    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

 

 

Dividend

 

·    As previously announced, subject to approval at next week's AGM, we
expect to pay a final 2022 dividend of 10.1 pence per share on 7 July to
shareholders on the register as at 16 June 2023

 

Formal opening of Desford

 

·    We are hosting the formal opening of the Desford brick factory on
Wednesday 17 May 2023

·    No new information will be provided on current trading further to
today's update. The presentation materials from the event will be made
available on the Group's website

 

Neil Ash, Chief Executive of Forterra plc, commented:

 

"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.

 

"Our other growth investments at Wilnecote and Accrington are both progressing
well.

 

"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."

 

 

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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