Ibstock could cut 15% of workforce as sales volumes slide on Covid shutdowns
Ibstock said on Wednesday that sales volumes slid from late March after the coronavirus lockdown was imposed, as it announced that around 15% of its workforce could be axed.
In an update for the five months to the end of May, the manufacturer of clay bricks and concrete products said sales volumes in the first 10 weeks of the year were "modestly below" the comparative period as it entered 2020 "against the backdrop of more subdued market conditions".
There was a sharp drop in sales volumes from late March as the government introduced measures to slow the spread of Covid-19 and Ibstock’s construction and housebuilding customers closed sites.
In April, volumes in the clay division fell around 90% on the year, but volumes in the concrete segment were "relatively more resilient" thanks to their exposure to infrastructure and repair, maintenance and improvement markets.
Ibstock said trading conditions have started to improve as the construction and housebuilding sectors return to work. The group said it has seen a "modest" recovery in clay brick sales although volumes remain around 70% below this time last year. Concrete volumes are now at around half the level they were in the same period in 2019.
Overall, group revenues for the three months to 31 March were down around 10% versus the comparative period, with a 75% decline in the two months to 31 May 2020.
The company said it was conducting a review of all operations which should lead to a material reduction in its fixed cost base. As part of a series of restructuring proposals, it has entered into consultations with employees, with up to 375 positions - or 15% of the workforce - potentially impacted.
"Current trading conditions remain difficult but the combination of the cost reductions, restructuring measures and improved liquidity have strengthened the group's ability to meet current challenges and benefit from the eventual recovery in its core markets," it said.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "With housebuilders suspending operations for several weeks it’s no surprise brick demand has collapsed. Even now the sector’s returned to work output is likely to be lower and slower, with a focus on running down existing inventories, and as a result it will take longer for the recovery to reach Ibstock.
"Since the group can do nothing about the unpleasant market conditions, management’s focus is on cutting costs and nursing the balance sheet through the current crisis by preserving cash. It’s had some early success, thanks to government support, but with net debt already jumping significantly it needs to do more if it’s to weather what could be a sustained slowdown."