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Forterra expecting modest dip in pre-tax profit

Forterra blocks

Trading update warns of recent weakening in activity with brick and block volumes down

IN a trading update covering the period from 1 July 2019 to date, Forterra plc, one of the UK’s leading producers of manufactured masonry products, say that while volumes into the new-build housing market have remained broadly in line with plan, trading in relation to distributors and non-residential applications has slowed.

With key indicators such as UK national brick sales volumes, construction output, new housing starts, housing transactions and consumer confidence also pointing to further uncertainty in macroeconomic conditions, the Group says its sales volumes have been affected by this recent weakening of activity, with brick and block volumes down in line with the overall market, whilst precast concrete sales have slowed in recent weeks, despite good growth earlier in the year.

While a sustained improvement in productivity has now been achieved, Forterra say their Bison precast business is unlikely to deliver the level of margin growth anticipated in the second half as a result of delays in a number of large contracts.

In light of the above factors, and recognizing the current macroeconomic uncertainty, the board now expects profit before tax to be modestly below last year’s result (2018: £64.8 million), although the Group is continuing to generate strong operating cashflows to support capital investment and the previously announced increased dividend payout.

Construction of the company’s new brick facility at Desford, at an investment of £95 million, is progressing to plan with site clearance completed and work under way on the building’s foundations. The new plant is expected to commence full production during 2022.

Despite the short-term political and economic uncertainty, Forterra’s board says it remains confident in its strategy and believes that the business is well positioned to benefit from attractive market fundamentals over the medium term.

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