Shares in Michelmersh Brick (MBH) fell 17 per cent after the specialist brick manufacturer warned that profits for the year to the end of December will be at or around a similar level to the previous year.
Increased competition has meant that average selling prices will not now rise to levels previously anticipated. In fact, average selling prices have been falling across the market this year, and joint chief executive Frank Hanna reckons there will be little or no recovery in prices at the start of 2017.
Michelmersh has successfully found a new source of carbon additives used in brick manufacturing at its Freshfield lane site, but the higher levels of output yield enjoyed from previously used additives will be slightly reduced going forward.
On a brighter note, the order book remains ahead by 5 per cent compared with the June half-year, and cost savings have been identified. Geological issues with the clay at the Romsey site have been addressed, and the site is moving back to full capacity, but expansion into the new available reserves has been restricted.
UK brick production is now down 20 per cent from a year ago, and as a result, brick reserves are now at their lowest level this year. Once this pile is reduced further, continued demand for bricks from housebuilders and the repair, maintenance and improvement market should allow brickmakers to start increasing output once again.
