Shares in Travis Perkins (LSE:TPK) tumbled by 10% within the first 15 minutes of trading following a significant reduction in its annual profit forecast.
The building materials group now anticipates an adjusted operating profit for 2023 to fall between £175 million and £195 million. This marks a substantial decline from its previous guidance of £240 million set in June, which itself was a 12% downgrade.
CEO Nick Roberts attributed the grim outlook to persistent challenges in the newbuild housing and domestic repair sectors.
The UK housing market has been adversely affected by rising interest rates, leading to a slowdown in both construction and housing transactions that typically trigger repair and improvement projects.
Additionally, a tightening grip on disposable income has led consumers to cut back on property spending.
Travis Perkins (LSE:TPK) also noted a significant slump in market activity and sentiment in September. The company faces further pressure from deflation in commodity prices, forcing it to sell existing stock at reduced market prices to maintain competitiveness.
Despite the immediate challenges, the company remains optimistic about its long-term prospects. It believes that the UK's ongoing housing needs and the imperative to decarbonise existing buildings offer a positive outlook for the future.
At 8.15 am, the stock was changing hands for 724.6p, down 81p.
Analysts at UBS said: "It appears the group's focus on volumes over margins has had a meaningful impact on profitability in the short term."
They added: "We expect the shares to react negatively but will look to see to what extent H2 margin pressure is temporary (sell-through of legacy stock) and to what extent the decline will need to be extrapolated into 2024."