AGM trading update
24 May 2022
FORTERRA PLC
AGM trading update
Continued strong trading, upgraded FY22 expectations, Desford on track
Ahead of our AGM which is to be held at 12.00pm today, Forterra plc (the 'Group'), a leading UK producer of manufactured masonry products, provides this trading update for the four-month period ended 30 April 2022 (the 'period').
Trading:
· Strong trading continued throughout the period with results ahead of both the prior year and 2019 comparatives as well as management's expectations.
· Group revenue in the period was 25% ahead of 2021 and 18% ahead of 2019 with sales volumes generally ahead of plan with brick volumes 6% ahead of both prior year and 2019.
· We have secured approximately 85% of our energy requirements for 2022, insulating us from considerable volatility and uncertainty. In addition, we have fixed around a third of our 2023 gas requirement, with c65% fixed in Q1 and have forward gas positions out to 2026.
· The Group continues to face further cost inflation although we have successfully passed on cost increases to our customers with brick selling price increases of 12% implemented from 1 April in addition to the 16% applied in January.
Strategic Investment:
· Construction of the new £95m Desford brick factory, which will contribute to earnings from 2023 and is expected to increase annual EBITDA by £25m by 2025, continues to progress in line with our timetable and budget, with commissioning expected by the end of the year.
· In order to de-risk the £27m Wilnecote brick factory refurbishment project, in response to the global supply chain issues limiting the availability of semi-conductors and chips used in the robotic equipment, we have delayed the commencement of the project and temporary closure of the factory by 3 months. The factory is now expected to close at the end of September 2022 rather than at the end of June 2022, with the duration of the project remaining unchanged and the factory due to close for a 12-month period. This rescheduling will have a positive impact of c£1.5m on the 2022 result.
· We continue to progress our pipeline of attractive organic growth projects beyond those already announced and have recently invested £1.8m in securing 4.5m tonnes of clay reserves at our Swillington site where we retain the optionality to construct a new brick factory in the future.
Share Buyback Programme:
· Our £40m share buyback programme continues, with a total of c6.6m shares at a cost of c £16m repurchased and cancelled to date. We expect to complete the programme by the end of the year.
Outlook:
· Trading performance in the period exceeded management expectations, although capacity and inventory constraints mean that the favourable sales volumes run rate relative to the prior year will not be sustainable for the remainder of the year.
· Both our order book and recent customer announcements point to a continuation of current strong trading conditions, although we remain watchful of the increasing macro-economic uncertainty.
· Based on our performance to date and expectations for the coming weeks, we expect the Group to deliver a half year result ahead of both the 2021 and 2019 comparatives.
· Driven by the Group's performance in the period, our forward outlook and the rescheduling of the Wilnecote project, the Board also expects that the full year result will be materially ahead of its previous expectations.
This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No 596/2014.
ENQUIRIES
Forterra plc +44 1604 707 600
Stephen Harrison, Chief Executive Officer
Ben Guyatt, Chief Financial Officer
FTI Consulting +44 203 727 1340
Richard Mountain / Nick Hasell
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