Forterra confident in full-year profits after strong fourth quarter

Forterra reported on Tuesday that it enjoyed good trading in the final quarter of 2018, instilling confidence that full-year profit before tax will meet expectations.

The construction supplies outfit said brick volumes for the year were modestly ahead of those seen in 2017, with Forterra able to meet demand thanks to a double digit increase in output and investment made in de-bottlenecking projects.

Block sales and aircrete volumes rose year-on-year, while sales of pre-cast concrete products also improved.

A statement from Fronterra said: "The UK brick market has continued to perform well, with high levels of capacity utilisation across the industry due to the sustained increase in new housing output over the last few years. Brick imports have increased to help satisfy demand and now represent over 16% of total UK demand."

The AIM-traded company added that it continues to generate a strong level of operating cash-flow, while capital expenditure included an investment of £4.5m made to secure further long-term clay reserves for the London Brick facility.

Net debt at 31 December 2018 was approximately £39m compared with £61m at the start of 2018.

"The overall fundamentals of the market continue to be favourable, supported by the government's commitment to further increase new housebuilding. In this context, the group announced in May 2018 a project to build a new brick factory at Desford which will increase our total brick capacity by 16% whilst also reducing the cash cost of production," said Fronterra’s statement.

The application for planning consent for the Desford project is progressing following submission to the local authority.

Broker Peel Hunt said: "We continue to see Forterra as a good way to play the housing market as it will benefit from either private or social housing output growth and as the imports act as a buffer to any slowdown in demand."

Forterra’s shares were up 2.89% at 249.00p at 1602 GMT.