Ibstock cuts output by 20% after summer sales miss

Ibstock reduced its production levels by a fifth on Monday following a 22% drop in sales for the quarter ending in September. The Leicestershire-based company, the largest brickmaker in the UK, issued a second profit warning this year and now forecasts full-year profits will land in the mid-£40m range. This projection is significantly lower than the analyst consensus of £59m that had been previously expected.

Joe Hudson, the chief executive, stated that trading conditions deteriorated sharply during the third quarter with weakness continuing into October. He explained that the company responded by lowering output to manage inventory and taking further cost actions. Hudson noted that while these production decisions create a near-term earnings headwind, they are necessary to align output with current demand levels. The company is focusing its cost savings and cash management initiatives on overhead and discretionary spend.

Market data cited by Ibstock shows that UK brick market volumes declined by 17% year on year in July and August. The company indicated that weak market conditions persisted through September and October. This slump in demand has forced the firm to tighten its control over cash flow. The production cuts directly impact short-term revenue as the company adjusts its supply chain to match reduced customer orders.

The profit warning came days after the Office for Budget Responsibility cut its forecast for the number of new homes to be built by 2031 by 190,000. Angela Rayner, the housing secretary, has admitted there is only a slim chance the government will meet its goal of building 1.5m new homes this parliament. Estimates suggest the target could be missed by a third, reflecting the deepening downturn in the housebuilding sector.

Ibstock shares fell by more than 8% on the news. The company criticized the government for delaying the launch of the Your First Home support scheme. This scheme is designed to help first-time buyers in England purchase new-build homes with a 2.5% deposit. Ibstock described the announcement as a welcome intervention but expressed disappointment that the start date is set for April 2027 rather than sooner.

Analysts at Peel Hunt, Clyde Lewis and Sam Cullen, noted in a report to investors that domestically exposed building stocks like Ibstock continue to face very challenging industry conditions. They argued that while the new Your First Home program should be modestly helpful next year, lower interest rates remain the key factor for a pickup in sector activity and share prices.