Ibstock Warns Again as Brick Sales Miss by 22%
The UK's largest brickmaker cut output by a fifth and issued its second profit warning of the year, blaming a housing slowdown and a delayed first-time buyer scheme.
Ibstock, the UK's largest brickmaker, saw sales in the three months to September come in far below its expectations, and the company has now cut production by a fifth.
A second warning in a year
The Leicestershire company said on Monday that sales in the three months to the end of September came in 22% below its expectations. It issued its second profit warning of the year and said full-year profit would be "materially below" earlier forecasts.
Ibstock now expects profit in the mid-£40m range. The analysts' consensus had been £59m.
The shares fell by as much as 13%, the biggest drop on the London market that day. Over the year, its market value has halved, to £277m.
Market volumes are falling
UK brick market volumes were down 17% year on year in July and August. Conditions stayed weak through September and October.
Chief executive Joe Hudson said trading "deteriorated sharply" in the third quarter. Ibstock has cut production to work down stock and is tightening spending and cash control, mainly on overheads and discretionary items. The cuts will weigh on earnings for now, Hudson said, but are needed to bring output in line with demand.
Criticism of the government
Ibstock also criticised ministers for a delay in the Your First Home scheme, which is meant to help first-time buyers in England buy a newbuild with a 2.5% deposit. The company called the scheme a welcome and potentially meaningful step, but said that pushing its start to April 2027 is disappointing and adds pressure on near-term demand.
The warning follows a cut by the Office for Budget Responsibility, days earlier, to its forecast for new homes built by 2031. The reduction was 190,000. Housing secretary Angela Rayner has said there is only a "slim chance" of meeting the government's goal of 1.5m new homes this parliament, and estimates suggest the target could be missed by a third.
Analysts' view
Clyde Lewis and Sam Cullen of Peel Hunt said building stocks exposed to the domestic market still face very challenging conditions. They expect the scheme to be modestly helpful next year, but said lower interest rates remain key to a pickup in activity and share prices.
Our View
Ibstock's numbers add a supplier's voice to a debate usually told through housebuilders and forecasters. Its case is that the demand gap is real now and the start of the policy help has been pushed back. The next test is whether the April 2027 start date holds, and whether lower interest rates, which Peel Hunt calls the key, arrive first.
Source: The Guardian