Optimism at Forterra Spurs Facilities Upgrades
Forterra plc recently announced a trading update for the 2016 third quarter, covering July to October.
Forterra plc recently announced a trading update for the 2016 third quarter, covering July to October. Trading in the period has been encouraging, with brick sales volumes running ahead of prior year in each month and on a year-to-date basis. The group reportedly continues to see strong levels of activity from the major housebuilders, and the excess inventory being carried by merchants is working through the supply chain, as expected. At the same time, the level of brick imports has reduced. The group anticipates operating profit for 2016 to be in line with management’s expectations. The business continued to generate a strong level of operating cashflow, enabling net debt to be reduced further to £112.1 million (approximately $139.6 million) after payment of the interim dividend of £4 million (~ $5 million).
In line with its strategy to optimize its manufacturing footprint and add incremental capacity through debottlenecking projects, the board has recently approved capital expenditures of £6.5 million (~ $8.1 million) at two of its brick facilities. At Desford, the project to increase gas capacity and install new kiln burners reportedly has begun, with an estimated brick capacity increase of 10 million per year. A capital expenditure has also been authorized to replace the old dryers at Claughton, which will improve the efficiency of the production process and yield an additional volume of 5 million brick per year. The Claughton kiln was turned off in August 2016, and it is planned to carry out the work in the first half of 2017 in order to be in a position to relight the kiln in the summer of 2017.
In October 2016, the group completed the sale of its Structherm subsidiary in order to focus on improving and growing the core businesses of brick, blocks, and other concrete and clay building products. Structherm manufactures structural external wall insulation solutions for residential buildings, and recorded sales of £3.7 million (~ $4.6 million) and earnings before interest, taxes, depreciation, and amortization (EBITDA) of £0.1 million (~ $0.1 million) in 2015. Its net asset value at disposal was £0.1 million (~ $0.1 million).
For more information, visit www.forterraplc.co.uk.