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Ibstock warns earnings will be hit by Beast from the East, lower-than-expected output

Ibstock plans to increase maintenance activity over the next year, resulting in plant shutdowns and higher costs

bricks
Shares fell more than 11% in morning trading

Ibstock Plc (LON:IBST) shares plunged as it warned that the so-called Beast from the East, higher energy costs and lower-than-expected production would impact full-year earnings.

The maker of clay bricks and concrete products said the icy weather at the start of the year and an increase in energy costs dragged on its first-half results.

For the six months to June 30, it expects adjusted earnings (EBITDA) of £58mln and reported EBITDA of £66mln.

Maintenance activity to rise

In the second half, production is likely to come in below expectations despite correction measures. The company plans to increase maintenance activity over the next year to bring operations to sustainable levels to meet increasing demand.

For the year to the end of December 2018, the group expects adjusted earnings (EBITDA) of £121mln to £125mln, compared to £119.6mln last year. On a reported basis, EBITDA is forecast to be in the range of £130mln to £134mln, up from £112.1mln.

Joe Hudson, who started as chief executive in April, said demand in the UK bricks markets is “robust” and the outlook for the UK clay business “remains encouraging”, supported by the ongoing need for new housing.

READ: Ibstock confirms Joe Hudson to takeover as CEO from April 4

"However, following my appointment as CEO, the group has completed a review of its brick manufacturing assets which has identified a number of measures that are required to sustain the quality and range of our production output,” he added.

“While the resulting additional maintenance shutdowns and extra spending on plant maintenance and refurbishment will have a short-term impact on our financial performance, we firmly believe that it is the right thing to do for our customers and to maximise long-term value for shareholders. “

Shares fell 11.7% to 245p in morning trading. 

Quick facts: Ibstock PLC

Price: 210 GBX

LSE:IBST
Market: LSE
Market Cap: £860.08 m
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