23 January 2025

FORTERRA PLC

Full Year 2024 Trading Update

Adjusted EBITDA in line with guidance, strong operating cash generation with net debt better than expectations

Forterra plc (the 'Group'), a leading UK manufacturer of essential clay and concrete building products, provides its trading update for the year ended 31 December 2024 ahead of its full year results which are scheduled for 12 March 2025.

Trading and Results

·    We saw a modest improvement in trading conditions in the final months of 2024 with despatches remaining resilient in the run up to Christmas when there is often a more pronounced slowdown

·    Full year revenue was in line with the prior year at c.£345m (2023: £346.4m), with a double digit increase in H2 revenue relative to both the prior year and H1 24. We benefited from volume gains in some of our concrete products with brick volumes flat year on year. We have continued to maintain pricing discipline with selling prices remaining relatively stable across our product range

·    Adjusted EBITDA is expected to be around £50m (2023: £58.1m), in line with our previous guidance

·    Department of Business and Trade figures highlight that UK brick despatches in the 11 month period to November were 1% higher than the prior year with despatches in the three months to November 18% ahead of the corresponding period. Total UK brick consumption in 2024, inclusive of imports, is still expected to be around 30% behind 2022 levels

·    We expect to report a strong improvement in our cash generation, with an adjusted operating cash inflow in the region of £60m (2023: outflow of £5.3m), reflecting both the benefit of our management actions to align output with demand and continued disciplined cash management. We expect a continuation of strong operating cash generation in 2025

·    As a result of the above, net debt before leases was lower than expected at c.£85m, equating to leverage of c.1.9 times on a banking covenant basis (June 2024: 2.3 times) and a c.£8m reduction on 2023 (£93.2m), notwithstanding capital spend of over £20m on our strategic projects during the year

Outlook

·    Whilst we now see signs of modest improvement in our markets, recent heightened macro-economic uncertainty dictates that the timing and trajectory of the recovery remains uncertain

·    We continue to take encouragement from the Government's ambition to materially increase housebuilding but remain wary of the challenges in delivering this. We look forward to the Government considering wider levers to stimulate both supply and demand for new housing and in the short term we are watchful as to any impacts arising from the changes to Stamp Duty on 1 April 2025 which will influence housing affordability

·    We continue to anticipate modest levels of cost inflation heading into 2025, including Employers' National Insurance contributions as outlined in the Autumn Budget. We have secured around 85% of our energy requirements for 2025 and have good levels of coverage for 2026 and 2027. To mitigate cost increases we have announced selling price increases for 2025 with customer discussions continuing

·    The Group remains well placed to capitalise on a recovering market with our £140m programme of strategic investment in our facilities at Desford, Wilnecote and Accrington nearing completion and providing a 15% increase in brick manufacturing capacity and improved efficiency relative to the previous cycle