Forterra, the Northampton manufacturer of clay and concrete building products, is taking further steps to align production levels with lower market demand, seeing the mothballing of a brick factory.
In a third quarter trading update for the nine-month period ending 30 September 2023, the company revealed that a consultation is currently underway on the mothballing of the Claughton brick factory in Lancashire, along with cuts to production in Forterra’s Aircrete business.
Forterra said: “The market weakness seen in recent months, coupled with the lead time associated with efficiently reducing production, will lead to our inventory build in 2023 being higher than previously anticipated.”
It comes after signs of market improvement in May and June did not continue into the second half, with market demand deteriorating in July and August.
Forterra added: “In July we guided to a full year 2023 EBITDA with a more balanced H1/H2 split, based on the assumption that the levels of demand seen in June would continue. However, we are now anticipating demand to remain at the levels which we have experienced over the past quarter and accordingly expect full year EBITDA to be below previous expectations.”
Commissioning of the firm’s new Desford brick factory, however, continues to progress.
Looking ahead Forterra expects to manage its operations on the assumption that 2024 demand will be at a similar level to 2023 and will look to align production output with this level of sales, thereby limiting further inventory growth.
The business noted: “As we set out at the half year, we expect FY24 results to benefit from a more stable energy cost environment, a stabilisation of customer inventory, the substitution of imported bricks as well as the full year benefit of previously announced cost reductions, offset by reduced operating efficiency driven by a reduction in production.
“Growing political focus on increasing housing supply ahead of a general election reinforces the Board’s confidence in the long-term industry fundamentals and the Board remains confident that the Group remains well placed to benefit when market demand recovers.”
