2 days ago
Shares in brickmaker Ibstock tumble as housing market recovery leads to higher costs
Shares in Ibstock fell sharply on Wednesday after the brickmaker flagged a spike in fixed costs and weaker than expected selling prices.
The FTSE 250 firm, the UK's largest brick manufacturer, cut annual earnings expectations in an unscheduled trading update that warned a 'more competitive market backdrop' has made passing on the 'full impact of cost inflation more challenging'.
Ibstock has been boosting productive capacity at several of its clay factories in anticipation of much higher demand and a UK housing market recovery, which is set to drive revenues 'materially' ahead of this time last year.
But Ibstock said these efforts have also led to 'higher than expected incremental fixed costs' as productivity and operational efficiency 'ramp up from initial lower levels at these factories'.
Average selling prices have also been 'adversely impacted by sales mix', meaning Ibstock expects sales prices in both clay and concrete to be 'broadly in line' with last year's levels in the first half.
Ibstock's adjusted earnings before nasties plummeted 26 per cent to £79million in 2024 following a 'significant' drop in sales volumes.
The group told shareholders it now expects 2025 EBITDA to come in at £77million to £82million, which is roughly 14 per cent below current market consensus of £92million, according to analysts at UBS.
The investment bank assumes a £6million to £8million headwind from pricing not offsetting cost inflation, with cost inflation of 3 to 4 per cent expected for the year, and a £5million to £6million incremental cost from adding back productive capacity.
Ibstock shares slumped 14.1 per cent to 166p by mid morning. They remain 13 per cent higher over the last 12 months.
The group told investors its key organic growth projects remain on track, which combined with 'significant investment in our core business' it said leaves Ibstock 'well positioned to support the significant unmet demand for new build housing in the UK'.
Boss Joe Hudson added: 'Despite ongoing uncertainty, we are encouraged by signs of recovery in the UK housing market.
'Notwithstanding the margin headwinds encountered in 2025, we remain confident that our recent actions alongside our strategic investments leave us well positioned as activity levels continue to pick up.'
Equity analyst at Hargreaves Lansdown Aarin Chiekrie, said: 'Ibstock's been firing up the kilns used to make the bricks and adding back capacity at several of its factories, [but] its fixed costs have soared.
'Until demand and production ramp up further, operations won't be as efficient as the group would like, and profitability is getting squeezed in the meantime.
'On top of that, average selling prices have been hurt by a shift in mix towards newbuild markets, which have recovered quicker than the broader construction market.'
