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Investing.com -- Shares of Ibstock Plc tumbled more than 11% on Wednesday after the building materials manufacturer issued a trading update, warning that profit margins remain under pressure, despite reporting higher first-half sales, supported by a recovery in new build residential construction.
The company said that activity levels across its markets were well above those in the same period last year.
As a result, it expects first-half sales to be materially above the prior year, with volumes for both clay and concrete products anticipated to be broadly in line with H1 2024.
To meet growing demand, Ibstock has resumed production at several factories. However, this has added fixed costs during the period.
The company noted that it is still working to improve productivity and operational efficiency at those sites, with weaker-than-expected efficiency noted at two to three key locations.
While volume performance is encouraging, estimated to be up around 15% for H1, the benefit has been more than offset by a weaker sales mix and pricing pressures.
Growth has been stronger in the new build segment, while the RMI market has lagged, and pricing has been softer, especially in distribution channels serving smaller housebuilders and RMI customers.
Adjusted EBITDA for FY25 are now forecast to be between £77 million and £82 million, compared to £79 million in FY24.
RBC Capital Markets noted this reflects a roughly 14% downgrade at the midpoint, attributing the decline to a £6–8 million drag from adverse pricing and mix, and a further £5–6 million impact from higher incremental fixed costs.
Progress on capital investment projects remains on schedule. Ibstock said production volumes from recent investments are performing as expected.
Phase 2 of its ceramic facades project, a larger manufacturing facility, is under way and targeted for completion by year-end.
The company added that iys long-term investments in its core clay and concrete operations continue to support demand for new build housing in the U.K.
"Despite ongoing uncertainty, we are encouraged by signs of recovery in the UK housing market," chief executive Joe Hudson (NYSE:HUD) said in a statement.