Forterra positioned for recovery in UK brick orders

Forterra's Cradley Special Brick factory is at Corngreaves Trading Estate, Cradley Heath.

Last year revenue was down 24 per cent to £346.4 million with pre-tax profits declining 55.9 per cent to £31.1m.

The impact of falling sales volumes was partially offset by pricing benefits.

Despite weak demand, pricing across Forterra's range of products remained resilient with further modest price increases expected this year.

Figures published by the Department of Business and Trade highlight that UK brick despatches in the three-month period to December were 29 per cent lower than the equivalent period in 2022, with the cumulative full year reduction also at this level, leaving industry despatches at a similar level to that seen in the global financial crisis.

Forterra's own despatches fell by a greater percentage due to its exposure to volume housebuilding which suffered the greatest impact from rising interest rates.

Production has been reduced through the mothballing of factories, shift reductions and production breaks. It delivered further savings through restructuring commercial and back-office functions.

These actions will deliver annualised fixed costs savings in excess of £20m, with around £6m realised in 2023 and the balance being realised in 2024.

Forterra says temporary reductions will not impact its ability to respond quickly when our markets recover, with the new Desford brick factory also providing a significant capacity uplift.

The £95m investment in New Desford, the largest and most efficient brick factory in Europe is largely complete with the factory operational.

The £30m redeveloped Wilnecote factory, designed to service the commercial and specification market, is expected to recommission in the first half of this year.

With a general election expected in 2024, demand is anticipated to remain subdued in the near term.

Chief executive Neil Ash said: "Forterra produced a resilient performance in 2023, in what turned out to be a very challenging year for our industry. Demand for new housing in the UK fell substantially, driven by increasing interest rates adversely impacting affordability and therefore demand for new homes.

"In light of this lower demand management took decisive action on our cost base. Assuming 2024 demand remains consistent with 2023, our management actions will ensure output is broadly matched with sales, thus limiting future inventory build.

"Importantly, however, these temporary reductions will not impact our ability to respond quickly when our markets recover. Indeed, one bright spot during 2023 was the commissioning of the new Desford brick factory, which gradually ramped up production throughout the year, and which will provide a significant capacity uplift in improved markets.

"With the long-term under-supply of housing in the UK continuing to worsen, and with our previous capacity constraints now addressed, the board remains confident in the group's ability to benefit as our key markets recover."