UK Brickmaker Ibstock Cuts Production Amid Housing Sector Slowdown
Ibstock reported a sharp drop in summer sales and cut production, pointing to government delays in launching new housing support schemes.
At a glance
- Ibstock reported a 22% drop in sales below expectations for the quarter ending in September.
- The company issued its second profit warning of the year, expecting full-year profits in the mid-£40m range.
- Ibstock criticised the government for delaying the launch of Yamaha First Home support scheme.
- Peel Hunt analysts Clyde Lewis and Sam Cullen noted that a revival in sector activity ultimately depends on declining borrowing costs.
Sales at the UK's largest brickmaker fell sharply over the summer months, prompting the firm to reduce its manufacturing output by a fifth.
Leicestershire-based Ibstock blamed government delays in rolling out new buyer support programs for worsening the downturn in the housing sector.
Production cuts and profit warnings
Ibstock revealed on Monday that its sales dropped 22% below expectations during the quarter leading up to the end of September. The firm cut production levels by a fifth to manage inventory and maintain cash control.
The company issued its second profit warning of the year after brick market volumes across the UK fell by 17% year on year across July and August, with weak conditions persisting through September and October. Full-year profits are now projected to be in the mid-£40m range, falling significantly short of a previous consensus of £59m.
Criticism over delayed government support
Ibstock pointed to government inaction as a compounding factor for its near-term struggles. The company criticised the decision not to start the Your First Home support scheme until next April.
The program is intended to assist first-time buyers in England in purchasing new-build homes with a 2.5% deposit. While welcoming the intervention, Ibstock stated that the delay has added pressure to current demand. Meanwhile, housing secretary Angela Rayner acknowledged a slim chance of meeting the administration's target to build 1.5m new homes this parliament.
Broader market outlook
The profit warning follows a decision by the Office for Budget Responsibility to reduce its forecast for new home completions by 2031 by 190,000. Peel Hunt analysts Clyde Lewis and Sam Cullen noted that domestically exposed building stocks face difficult conditions, adding that declining borrowing costs are ultimately necessary to revive sector activity.
What to watch: The implementation of the Your First Home support scheme.
What to watch: The launch of the Your First Home support scheme.
Reporting from: The Guardian. Spotted an error? Tell us.
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