Ibstock announced Q1 2022 performance is ahead of expectations whilst curbing inflationary pressure early on Thursday which boosted the brickmaker’s shares 7.5% to 179p.
Ibstock released full-year results for 2021 in March 2022 which were reportedly strong. The momentum from those results has carried on to the Q1 trading update on Thursday for the group.
Ibstock noted in all of its end markets, demand is still strong. The group’s clay plant network is working well, with production volumes slightly ahead of its estimates and a full recovery of input cost inflation thanks to its innovative marketing approach.
Despite some ongoing supply chain problems, the Concrete division performed in line with expectations due to solid operational execution for Ibstock.
Ibstock saw significant input cost inflation, which continued to characterise the operating environment, particularly in energy, freight, carbon, and materials. In the case of energy, the company’s hedging technique has helped it to stay afloat in the face of rising prices.
Ibstock has now covered nearly all of its power needs for the first half of the year, over 75% of its requirements for the second half, and more than a third of its requirements for 2023.
Ibstock is dedicated to take the steps necessary to safeguard and maintain margins in the future.
“Brickmaker Ibstock is plagued by soaring input costs and ballooning energy bills, but the group appears to be coping well,” said Laura Hoy, Equity Analyst, Hargreaves Lansdown.
“A focus on increasing capacity and efficiency at its factories has allowed it to jump on booming post-pandemic demand. Rising raw material costs have passed on to consumers and energy hedges have offered some protection.”
“You can’t fault Ibstock’s deft management through an increasingly thorny environment. It’s no mean feat to beat expectations despite these challenges.”
The group’s growth plans are moving well, with the Atlas, Aldridge, and Nostell capital investment projects all on track, and Ibstock Futures has made significant progress in integrating the recently acquired glass-reinforced concrete (GRC) assets into its operations.
The board now anticipates full-year 2022 performance to be modestly ahead of its earlier predictions, even though Ibstock wants to remain cautious of broader macroeconomic challenges.
Ibstock outlined a defined route for growth and value formation over the following five years, based on a combination of investment within its core business and diverse growth possibilities, supported by a set of medium-term financial targets, at the time of its 2021 results announcement in March 2022.
Ibstock stated its intention to launch a share buyback programme of up to £30m as part of its rigorous approach to capital allocation and with estimated group leverage below the target range on Thursday.
The capital return is in addition to the £100m in committed growth investments, and the group expects strong financial capacity to sustain more growth investment and additional shareholder returns in the medium term beyond this repurchase programme.
Hoy added, “Efforts to shore up the balance sheet are also paying off—the group’s £30m buyback is evidence. This is in addition to investment in the group’s growth initiatives, including growth in Ibstock Futures, its sustainable construction arm.”
“This part of the business holds a great deal of promise in our eyes, and we look forward to seeing how its latest addition of glass reinforced concrete assets will fit into the existing business.”