Brickmaker Forterra is advising on a restructuring of its commercial and support functions, and is reducing production as it reacts to a slowdown in housebuilding.
The company also said its previous profit expectations for 2023 may have been overly optimistic, with little sign of a market pick-up in the second half of the year, as it had previously assumed.
In a trading update today, Forterra said it expected to report revenue of around £183m for the first half of 2023, down 18% compared to 2022. Its expected pre-tax profit for the period “is broadly in line with management’s expectations.” ” to £18m, down 52% on the previous year.
Forterra said that as well as shutting down its brick factory in Howley Park, West Yorkshire, it had “implemented other production reductions”, resulting in a decrease in fixed costs of around £10m a year.
These changes were made in response to “difficult market conditions” as well as the recent opening of a new factory in Desford, near Leicester.
The company also said it was “consulting with affected people about a restructuring of our commercial and support functions”, which it hoped would save around £3m a year.
Forterra suggested further measures could be taken in the second half of the year, saying production decisions would be influenced by demand.
“Having replenished our inventories in the first half, we expect to limit our inventory growth in the second half and will continue to take appropriate steps to ensure our production is aligned with demand,” the update said.
The firm warned there was “significant uncertainty” about demand for the rest of the year, with rising interest rates expected to dampen demand for new homes “going forward predictable”.
The company said its previous expectations for 2023 had assumed “a slow start to the year followed by a significant recovery strengthening in the second half”.
However, it now expects “only a modest improvement in trading conditions and therefore expects to achieve full-year earnings before interest, tax, depreciation and amortization (EBITDA) with a more balanced first-half split/ of the semester”.
Forterra warned investors of weaker trading next year when it released its annual results in March, citing fewer homes being built. Housebuilders such as Persimmon and Taylor Wimpey have warned that their completions will be around 30 per cent lower in 2023 than in 2022.
