The Group delivered a resilient performance in the third quarter, reflecting our continued focus on customer service and execution, coupled with the disciplined management of capacity and costs.
Market demand in the period was more subdued than expected. As a result, and in line with the wider UK brick industry, sales volumes in the third quarter were below those achieved during the second quarter of the year. Despite these weaker volumes, effective cost reduction action combined with stable pricing resulted in margins for the quarter remaining robust.
The Board anticipates that the benefits of its actions will continue to mitigate demand weakness in the final quarter and, consequently, its underlying profit expectations for the 2023 financial year are unchanged.
Given the ongoing challenging market conditions, we will continue to actively manage capacity and costs. In doing so, we will ensure that our capacity is aligned to market demand, whilst ensuring we are well positioned to respond when activity levels recover.
The strength of our balance sheet continues to provide both resilience in more subdued conditions and strategic optionality for the future. This is reflected in our ongoing commitment to capability and growth investment, with key projects progressing well. We continue to expect our new Atlas factory to commission from the end of 2023, and to bring to market the UK’s first certified carbon-neutral brick in 2024.
Residential construction markets are expected to remain subdued in the near term. Notwithstanding this more cautious outlook we remain confident in our ability to continue to respond appropriately to market conditions. Furthermore, we will continue to progress the strategic initiatives that will underpin growth over the medium term.
Joe Hudson, Chief Executive Officer, commented:
“The Group delivered a resilient performance in the third quarter despite a very challenging market backdrop. I am proud of the way that everyone at Ibstock has remained focused on the delivery of a strong operational performance while also ensuring that the Group made continued strategic progress.
“As macroeconomic conditions stabilise, we expect a recovery in market activity, reflecting the significant underlying demand for new build housing in the UK. Whilst we are taking a cautious view around the pace and timing of this recovery, we remain confident in our ability to continue to respond to market conditions, taking the action necessary to protect performance, while ensuring the business remains well-positioned for an increase in activity.”