Brick maker Ibstock hit by beastly weather in slow start to 2018

Ibstock said the start of its financial year was slower than expected as the brick maker was affected by extreme late-winter weather.

In a trading statement on the first four months of 2018 before its annual general meeting the company said its US business was also affected by bad weather in the first quarter. Its shares fell 5.6% to 276.20p at 09:47 BST.

The FTSE 250 company, which had not updated investors since reporting solid trading in early March, said business was now picking up.

Ibstock is the latest company to be hit by the so-called Beast from the East – the Siberian weather system that brought snow, strong winds and freezing temperatures to the UK in late March. The construction industry was hit hard, suffering its steepest drop in activity since the May 2016 Brexit vote.

Ibstock said: “After a slower than expected start to the year for our brick and concrete businesses in the UK, which largely reflects an extended winter season, volumes have begun to return to more normal levels over recent weeks.”

The company said market fundamentals in the UK were solid and that demand for new housing would support its business. Prices of its products have risen though the cost of energy has been higher than expected.

“The board expects another year of progress for the group, albeit with performance expected to be weighted towards the second half,” Ibstock said.

Shares in the company fell 6% to 275p on Thursday morning.

The slow start to the year is only part of the reason why Ibstock shares trade lower, said analyst Mike van Dulken at Accendo Markets.

"Firstly, Ibstock says price rises are in-line with expectations. So housebuilders are already facing higher input costs for rather important materials to house construction. Secondly, Ibstock highlights Energy costs higher than expected, and likely to continue for the rest of the year. Assuming these costs have to be passed on, in order to protect margins, this means Housebuilders may be facing even more and continued price rises."

This was not good news for the sector, van Dulken said, with UK house price data softening amid consumer uncertainty linked to the "twin threat of BoE rate rises and muddled Brexit negotiating".

While the housing market fundamental demand may well remain strong, he questioned if the same can be said of the outlook for housebuilder profit margins, suggesting it was "only if house prices rise and/or costs stay manageable".