Ibstock Faces Margin Pressures Despite Robust Demand
Why we think this is bad
While Ibstock is seeing strong demand in its markets, the company is facing a number of headwinds that are impacting profitability. The RNS highlights a more competitive market backdrop, margin pressures, and higher than expected incremental fixed costs as factors weighing on performance. Additionally, the company's valuation appears stretched, suggesting the positive news may already be priced in. Overall, the combination of margin challenges, uncertain market conditions, and a potentially overvalued share price leads to a negative sentiment assessment.
Key Points
- Activity levels in the Group's markets have continued to be well above the prior year period
- Steps taken to add back productive capacity have led to higher than expected incremental fixed costs
- Average selling prices have been adversely impacted by sales mix, making it more challenging to pass on cost inflation
- Full year 2025 adjusted EBITDA expected to be in the range of £77 million to £82 million, compared to £79 million in 2024
Summary
Ibstock Plc, a leading UK manufacturer of building products and solutions, has issued a trading update for the second quarter of 2025. The company reports that activity levels in its markets have continued to be well above the prior year period, reflecting increased demand in residential construction markets. However, the company is facing a number of headwinds that are impacting profitability.
Specifically, the company has taken steps to add back productive capacity at several factories, which has led to higher than expected incremental fixed costs in the current year. Additionally, with market recovery more pronounced in new build residential construction markets, average selling prices have been adversely impacted by sales mix, making it more challenging to pass on the full impact of cost inflation.
As a result, the company now expects full year 2025 adjusted EBITDA to be in the range of £77 million to £82 million, compared to £79 million in 2024. The company remains confident in its strategic investments and ability to support the significant unmet demand for new build housing in the UK.