REG - Forterra plc - Q3 Trading Update

ForterraAnnouncement

11/10/2023 07:00

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RNS Number : 6927P  Forterra plc  11 October 2023

11 October 2023

 

FORTERRA PLC

 

Q3 Trading Update

 

Forterra plc (the 'Group'), a leading UK manufacturer of essential clay and
concrete building products, provides this third quarter trading update for the
nine-month period ending 30 September 2023 (the 'period').

 

Key points

 

·    The signs of market improvement seen in May and June did not continue
into the second half with market demand deteriorating in July and August.

 

·    Figures published by the Department of Business and Trade show UK
brick despatches in July and August 2023 averaged 16% lower than in June 2023,
and 28% lower than in the corresponding period in 2022. Within this, August
was weaker than July and our own despatches suggest a further softening in
September. These figures also highlight that UK brick industry despatches are
currently running below the levels seen in 2009.

 

·    Despite the weak demand, pricing across our range of products has
remained resilient overall.

 

·    In July we guided to a full year 2023 EBITDA with a more balanced
H1/H2 split, based on the assumption that the levels of demand seen in June
would continue. However, we are now anticipating demand to remain at the
levels which we have experienced over the past quarter and accordingly expect
full year EBITDA to be below previous expectations.

 

·    Following previously announced management actions, we have taken
further steps to align our production levels with market demand. Consultation
is currently underway on the mothballing of a further brick factory at
Claughton in Lancashire along with cuts to production in our Aircrete
business. The market weakness seen in recent months, coupled with the lead
time associated with efficiently reducing production, will lead to our
inventory build in 2023 being higher than previously anticipated.

 

·    Commissioning of the new Desford brick factory continues to progress,
with the challenges of replicating the product range now overcome. Although
output in the last quarter was below plan, the weaker market demand has meant
there was no impact on sales.

 

·    Looking ahead we expect to manage our operations on the assumption
that 2024 demand will be at a similar level to 2023 and, accordingly we will
look to align production output with this level of sales, thereby limiting
further inventory growth.

 

·    As we set out at the half year, we expect FY24 results to benefit
from a more stable energy cost environment, a stabilisation of customer
inventory, the substitution of imported bricks as well as the full year
benefit of previously announced cost reductions, offset by reduced operating
efficiency driven by a reduction in production.

 

·    Growing political focus on increasing housing supply ahead of a
general election reinforces the Board's confidence in the long-term industry
fundamentals and the Board remains confident that the Group remains well
placed to benefit when market demand recovers.

 

 

This announcement contains inside information for the purposes of article 7 of
the Market Abuse Regulation (EU) No 596/2014.

 

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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