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Forterra makes progress

15 Mar 17 Forterra, the former Hanson brick business, has shown modest growth in its first year as a listed company and debt reduction is running ahead of schedule.

HeidelbergCement sold Hanson Building Products to a US affiliate of Lone Star Funds for £900m in 2015. It was then rebranded under new ownership as Forterra and floated on the Lndon Stock Exchange in April 2016.

Forterra is the second largest manufacturer of bricks in Great Britain and a leading manufacturer of aircrete blocks.

In 2016 Forterra generated revenue of £294.5m, up 1.5% from 2015’s £290.2m.  Pre-tax profit, excluding exceptional items, was up 3.8% to £54.3m (2015: £52.3m).

Chief executive Stephen Harrison said: “Our first annual results as a listed company show good progress in the delivery of our strategy. Revenue and profit both increased year-on-year due to a strong performance in the second half as volumes to housebuilders continued at a good rate and the destocking in the supply chain at merchants and distributors eased towards the end of the year.

“2017 has started well, building on the momentum seen in the second half of 2016, with brick volumes for the first two months ahead of last year. The group continues to see strong activity levels from the major housebuilders and positive indications from these customers for at least the first half of the year. It appears that the destocking in the builders merchants' supply chain is now largely complete. As anticipated, price increases for the year have now been agreed with most customers in order to cover the increases in the cost base.

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"Based on our order book and current levels of activity, the outlook for the first half of the year is good. We have less visibility for the second half of the year, however we anticipate a more balanced outcome between the first and second halves than in 2016.”

Forterra sold its Structherm insulation subsidiary in October 2016 to focus on bricks, blocks and other concrete and clay building products.

After sales of aircrete blocks were affected for a few weeks in 2016 by the unavailability of pulverised fuel ash (PFA), which is a by-product of coal-fired power stations, Forterra is now working on a number of initiatives to secure supplies of PFA and alternative materials. Following the modernisation and expansion of the facility at Hams Hall in 2015, a further £600,000 has been invested at the plant to enable the use of conditioned (wet) PFA. Output at both the aggregate block plants increased in 2016.

A project at Desford to increase gas supply capacity and install new kiln burners has also now started, with an estimated brick capacity increase of 10 million a year (12%). A project to replace the dryers at Claughton has also been initiated. This will improve the efficiency of the production process and add capacity of five million bricks a year (11%). The Claughton kiln was turned off in August 2016, and it is planned to complete the project in the first half of 2017, relighting the kiln in summer 2017.

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