IN Brief:
- Forterra’s first half revenue fell 13.5% to £168.8m, with like for like sales down 9.3%.
- Adjusted EBITDA declined to £27m, although the adjusted margin increased to 16%.
- The manufacturer expects subdued demand to continue while expanding its brick slip and façade activities.
Forterra has reported a 13.5% fall in first half revenue to £168.8m as weak housing activity continued to reduce demand for bricks and other core building products.
During the six months to 30 June 2026, like for like revenue declined by 9.3%. Adjusted EBITDA fell by 9.7% to £27m, although the adjusted EBITDA margin increased by 70 basis points to 16% as the company controlled costs and managed production against lower volumes.
Adjusted profit before tax decreased by 12.7% to £14.5m, while statutory profit before tax rose to £11.5m from £8.4m, reflecting differences in adjusting items between the two reporting periods.
Operating cash flow fell to £8.5m from £30m, and net debt before lease liabilities increased to £74.5m from £69.4m. The board declared an interim dividend of 1.7p per share, compared with 1.9p a year earlier.
Market conditions are expected to remain subdued throughout the remainder of 2026. UK brick despatches were approximately 8% lower during the five months to May, leaving producers to balance reduced orders against the operational cost of maintaining manufacturing capacity.
The result follows the introduction of surcharges on selected brick and concrete products from June, introduced in response to higher diesel, transport, and natural gas costs. Forterra had also rescheduled some production towards the second half of the year to reduce exposure to more expensive energy.
Despite the weaker first half, the company maintained its expectations for the full year and is continuing to align output with demand while preserving the capability needed when market conditions improve.
Expansion into brick slips and façade systems forms part of that strategy. A new cutting facility at Measham represents an investment of approximately £2m, while the company’s Accrington operation has begun supplying projects with extruded brick slips.
Genuine clay finishes can therefore be incorporated into façade systems and offsite assemblies without using a full conventional brick. Demand is being supported by modern methods of construction, retrofit, recladding, and projects where reduced weight or faster installation offers a commercial advantage.
Low volumes challenge manufacturing capacity
Brick production carries a high fixed cost base because kilns, dryers, quarries, handling systems, maintenance teams, transport operations, and stockyards cannot be adjusted as quickly as demand for the finished product. A prolonged decline in despatches consequently places pressure on both margins and capacity decisions.
Manufacturers can reduce production, bring forward maintenance, or build stock in anticipation of future orders, but each response has limits. Excess inventory consumes working capital and storage space, while extended shutdowns risk losing trained employees and creating additional restart costs.
The wider construction outlook offers little immediate relief. Forecasts for a 3.3% contraction in UK construction output during 2026 include a 10% fall in private housing, the market most closely connected to brick demand.
Housebuilding is being constrained by mortgage affordability, development finance, planning delays, infrastructure obligations, regulatory costs, and subdued buyer confidence. Planning permission does not create material orders when completed values no longer support land, finance, levy, and construction costs.
The Building Safety Levy, due to take effect in October, will add another cost to eligible residential development, while the Future Homes and Buildings Standard will introduce further specification and performance changes in 2027. Taken together, those requirements may reduce the number of sites capable of progressing.
Weak demand also alters procurement behaviour. Housebuilders and contractors can slow the drawdown of existing stock, postpone orders, reduce phases, or seek shorter pricing commitments while waiting for clearer evidence of sales. Merchants are likewise less inclined to carry large inventories without confidence in near term turnover.
Suppliers must avoid cutting capacity so deeply that recovery produces shortages. Brick plants require substantial capital and long planning horizons, while trained production teams cannot be recreated immediately after closures or extended mothballing.
If demand strengthens after capacity has contracted, material availability may tighten quickly and prices may rise before total output returns to earlier levels. Preserving capability during a downturn is expensive, but rebuilding it later can be slower and more costly.
Forterra’s expansion into slips and façade systems provides some diversification from conventional housebuilding volumes. These products address offsite construction and refurbishment as well as new development, although they remain exposed to the same constraints on project starts and client budgets.
The move also reflects a broader shift among materials manufacturers towards tested systems rather than individual units. Contractors increasingly require installation support, digital product information, and clear evidence covering fire, moisture, thermal, and carbon performance.
Investment during a weak market creates its own tension. Companies that preserve cash too aggressively may enter the next cycle with an outdated offer, while those investing ahead of demand carry greater exposure if recovery is delayed.
Forterra’s maintained guidance indicates that trading remains within its planned range, but the first half figures show how little room the materials sector has for further deterioration. A sustained recovery now depends on housing sites passing the combined tests of finance, regulation, infrastructure, and buyer affordability.
