Falling output prompts brickmaker to revise down full-year expectations

BRICK manufacturer Michelmersh has revised down its full year performance after average selling prices failed to live up to expectations.

The company, which owns Telford-based Blockleys, said in a Q3 trading update that the UK brick market had seen falling output and a small increase in despatch volumes as manufacturers responded to market demand.

“The group’s ability to make the previously expected pricing gains in the second half has been impacted by average selling prices not rising to the levels anticipated and increased competition,” it said.

“Falling average selling prices across the market in 2016 suggest there will be little or no recovery in prices at the start of 2017.

“Due to (these) events, the board has revised its financial expectations for the current year and believes revenue and profit will be at or around a similar level to that reported for the full year 2015.”

The company said changes in the materials supply market had meant the business having to re-source the carbon additive used in brick manufacturing at its Freshfield Lane site.

It said while this process had been successful, the higher levels of output yield enjoyed over recent periods were likely to be slightly reduced going forward, being more in line with historic trends.

Despite the revision, the board said the group’s order book remained strong and was 5% ahead of that at the half year stage and cost savings had been identified that would help to mitigate the effect of negative market trends.

The directors added that the business remained committed to investment in its process and workforce, and would continue to provide premium products to a demanding marketplace.

“Our cash resources and cash generation allow us to seek investments that improve efficiency and continue to reward investors with a steady growth in dividends. The board reaffirms that strong long-term housebuilding and RMI market fundamentals remain in place for the forseeable future and that the group is well positioned to grow market share in the coming years,” it added.

The company will publish its full year results on March 20, 2017.