Release Date: March 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ibstock PLC (FRA:2I5, Financial) delivered a resilient performance in 2024, with adjusted EBITDA in line with expectations despite challenging market conditions.
- The company saw a progressive improvement in demand throughout the year, with second-half revenues surpassing both the first half of 2024 and the same period in 2023.
- New product development was a significant strength, with revenues from new and sustainable products increasing to 22% from 11% in 2023.
- The major organic growth program, including the wire cut brick factory at Atlas, is nearing completion, providing lower-cost efficient capacity for future market recovery.
- Ibstock PLC (FRA:2I5) maintains a robust balance sheet, with positive cash flows and a leverage ratio of 1.8 times, indicating financial stability.
Negative Points
- Revenues decreased by 10% to GBP366 million, primarily due to lower sales volumes in the core business during the first half of the year.
- Adjusted EBITDA fell by 26% to GBP79 million, reflecting the impact of lower volumes and reduced factory network utilization.
- The full-year dividend was reduced to 4.0p from 7p in the prior year, representing 52% of adjusted 2024 earnings per share.
- The Clay division faced challenges with lower volumes and weaker sales mix, impacting overall performance.
- Market conditions remain subdued, with housing starts in 2024 significantly below previous years, affecting demand in the construction sector.
Q & A Highlights
Q: Can you discuss the market share evolution in the Clay division and the current stock levels in the RMI merchant channel? Also, why is there a time lag in land disposals?
A: We deliberately reduced volumes in the first half of 2024, which led to a temporary market share loss. However, we regained this share in the second half due to improved market conditions and our focus on quality and service. Regarding RMI, merchant channels are managing stock levels tightly due to stretched balance sheets, which could present opportunities if market conditions improve. Land disposals take time due to the need for decommissioning, planning, and optimizing value, which typically spans three to five years.
Q: Are customers willing to pay a premium for CO2 neutral bricks, and what is the expected volume growth for 2025?
A: Yes, we are obtaining a price premium for our carbon-neutral bricks, although they represent a smaller portion of our output. We expect mid-single-digit volume growth in 2025, with a strong start to the year and potential upside from restocking and supply chain remobilization.
Q: What is the outlook for bolt-on acquisitions, and how is the market for brick slips developing?
A: We are focused on opportunities outside the core clay business, particularly in concrete and adjacent markets. We have a disciplined approach to M&A, ensuring strategic alignment and financial accretiveness. The brick slips market is developing well, with increased capacity and a focus on mechanical fix systems, which we expect to grow over time.
Q: How are you approaching shareholder returns, and what is the timing for these returns?
A: We aim to balance shareholder returns with maintaining a healthy level of indebtedness. Our free cash flow generation is expected to accelerate, allowing us to step forward with returns without waiting to reach the lower end of our debt range.
Q: Can you provide insights into the cost inflation, particularly natural gas, and the expected EBITDA margins at full utilization?
A: We have covered about two-thirds of our energy needs for 2025, with some softening in energy prices recently. We expect our business to achieve a top-line revenue of over GBP600 million with an EBITDA margin of around 28% in the medium term, contingent on a return to normalized demand conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
