Ibstock closes second brick factory, but sees FY in line despite lower sales

Building products supplier Ibstock said it was permanently closing one of its brick factories and cut jobs amid falling demand as the housing market contracted, although it remained confident in its medium-term prospects, with fourth-quarter trading in line with expectations,

The closure of the South Holmwood facility in Surrey follows that of its Ravenhead factory in Lancashire last summer. Ibstock on Wednesday said shutdowns would cost £15m and deliver an expected to deliver £20m a year in savings.

"Throughout the period we have focused on taking the right actions in light of near term market conditions, which has led to the difficult but necessary decision to reduce headcount across the business. At the same time, we have continued to progress the projects that will underpin growth as our markets recover," said chief executive Joe Hudson.

Full year revenues are expected to have fallen by 21% to around £405m, with adjusted core earnings in line with guidance.

"Trading in the final quarter in line with our expectations, underpinned by cost reduction action and stable pricing, with market conditions remaining subdued,” Ibstock said in a trading statement.

“Against this backdrop, while the pace of cost inflation has continued to moderate, it remains a feature, with some modest year-on-year inflation expected to be largely covered by pricing action.”

Aarin Chiekrie, equity analyst at Hargreaves Lansdown said the factory closure "isn’t great news and raises questions about the group’s ability to ramp up production quickly when the market turns. In the meantime, cost-cutting measures remain the key route to protecting group margins".

"There are some very early signs the worst may be behind Ibstock now. Cost inflation appears to have eased and the fact that lenders are becoming more competitive on mortgage rates is a major positive for homebuyers, which ultimately feeds through to increased demand for Ibstock’s products.”

Reporting by Frank Prenesti for Sharecast.com