Ibstock cuts profit outlook as UK brick demand falls 17%

By Nathan Brooks

Ibstock, the UK’s largest brickmaker, now expects full-year profits in the mid-£40m range, against analysts’ previous consensus of £59m. The Leicestershire-based company issued its second profit warning this year on Monday. It now expects full-year profits to be “materially below” previous expectations.

Quarterly sales came in 22% below expectations in the three months to September, prompting Ibstock to cut production by one-fifth. Ibstock reported that UK brick market volumes fell 17% year on year in July and August. Weak market conditions continued through September and October.

“Trading conditions deteriorated sharply during the third quarter, with weakness continuing into October,” said Joe Hudson, Ibstock’s chief executive. “We have responded by reducing production to manage inventory, taking further cost action and maintaining tight control of cash. These production decisions create an additional near-term earnings headwind but are necessary to align output with demand.”

Ibstock said its cost savings and cash-management initiatives focus primarily on overhead and discretionary spending. The warning came days after the Office for Budget Responsibility cut its forecast for new homes built by 2031 by 190,000.

Housing Secretary Angela Rayner said there was only a “slim chance” the government would meet its goal of building 1.5m new homes this parliament. Estimates cited in the report indicated that the target could be missed by a third.

Ibstock also criticized the government’s decision not to start the Your First Home scheme until next April, which the company specified as April 2027. The program is designed to help first-time buyers in England purchase a new-build home with a 2.5% deposit. Ibstock shares plunged more than 8%.

Ibstock put a medium-term frame on the intervention:

“The introduction of the Your First Home support scheme represents a welcome and potentially meaningful intervention for the UK housing market, with the potential to improve affordability, stimulate new-build demand and strengthen confidence in future housing supply,”

“While the announcement reinforces confidence in the group’s medium-term market outlook, the delay to its introduction until April 2027 is disappointing and has put additional pressure on near-term demand.”

What changes for Ibstock, builders and first-time buyers?

For Ibstock, the warning converts a 22% sales miss into a smaller production plan. The one-fifth cut is intended to align output with demand and manage inventory. Cost actions focus on overhead and discretionary spending, while Hudson said the output reduction creates an additional near-term earnings headwind.

For builders and first-time buyers, the 2.5% deposit scheme remains unavailable until April 2027. Ibstock expects the delay to add pressure to near-term demand, despite seeing the eventual program as a medium-term support for affordability, new-build demand and confidence in future housing supply.

In a note to investors, Peel Hunt analysts Clyde Lewis and Sam Cullen said: “Domestically exposed building stocks like Ibstock continue to face very challenging industry conditions.” The analysts added: “The new Your First Home programme should be modestly helpful next year but lower interest rates remain key to a pickup in sector activity and share prices.”

Lower interest rates therefore remain the key swing factor for a pickup in sector activity and Ibstock’s shares, Peel Hunt’s analysts said. Until demand improves enough to absorb a smaller production base, Ibstock’s full-year result will remain well below the previous £59m consensus.