Michelmersh Brick Share Discussion Threads

[wcjan25] 02/1/2006 11:59

with a 'beast from the east' forecast for large parts of january (ie. snow), this could be a decent short if gas prices explode higher

[m.t.glass] 21/12/2005 15:29

Gas price rises force brick-makers to extend festive break
By Christopher Hope and Ceri Radford (Filed: 21/12/2005)
The Telegraph

Almost two thirds of Britain's brick makers are taking longer-than-normal Christmas breaks in the first serious sign that the spiralling cost of wholesale gas is causing British industry to cut output.

The Brick Development Association warned yesterday that 60pc of the UK's brick makers are taking "extended shutdowns" and said the industry was now in a "major crisis" and warned that the high wholesale gas price as "almost unsustainable".

Brick-making is energy intensive, making it susceptible to the volatile gas price, which quadrupled to 170p a therm four weeks ago. Last night, the wholesale gas price closed down 1½ at 72¼p - more than twice the 31.45p level at the beginning of November.

Oliver Stephenson, the BDA's chairman, said: "This is a continuing crisis for all of the UK's energy intensive industries - brick, glass, chemicals and steel.

"Some sort of Government intervention is needed into the way the market has been operating. They have to look at the way that gas is traded. We have to buy it whatever the cost."

Yesterday Hanson, which is responsible for three out of every 10 bricks made in Britain, warned that it was stopping production at four major factories for the whole of January and wanted to push through a 7pc price rise.

Nick Swift, a spokesman, said: "We are trying to mitigate the cost base by suspending production. We're paying around 50pc more for our gas than this time last year and there is no sign of prices coming down."

Ibstock, which also has 30pc of the brick market in Britain, said it was considering an extended Christmas shutdown at some of its 24 plants. Wayne Sheppard, managing director, said: "There may be an extension in the planned shutdowns of some factories. I can't rule out there will be an extended Christmas shutdown."

Wienerberger, which has a 15pc UK share, said it had stopped making bricks at seven of its nine British plants throughout December. Wayne Richardson, company secretary, blamed the prolonged closure, the first in his 18-year career at the company, on the soaring gas price. It plans to open as normal in January, he said.

Baggeridge, which controls 9pc of the UK market has said it was implementing extended Christmas shutdowns at two factories, and warned that it would hit first-half profits.

Alexander Ward, Baggeridge's chairman, said: "Along with many of our competitors, we will be implementing extended Christmas shutdowns, at two factories. As a consequence, we believe that the first-half results will be well below the prior year."

[fishyneck] 15/12/2005 12:48

I've had a rough add up of the main importers and would estimate
that last year around 140,000,000 bricks were brought in.

fn.

[m.t.glass] 15/12/2005 01:42

"..I'll found out the overall figures tomorrow if anyones interested..." (FN)

Sure to be a nine-figure number ;o)

And apart from the reasons listed, bricks have always been used as a makeweight for any ship that was short of a full load. One merchant I dealt with specialised in collecting whatever bricks arrived every day or two and marketing them as restricted-quantity lots.

[serratia] 14/12/2005 19:51

Thanks FN a 10-12% price increase would allow MBH to make the brokers forcast of £550k.As for imports the uk gas price increase has added 2p/brick to costs based on 19.5 bricks/therm and an increase of 40p / therm. Trucking costs from the mainland must be £150/ton (?)How many bricks/ton I don't have one around to weigh it. If the above is correct £150/2P=7500.So it looks as though our gas price increase has added more to the cost than the import costs. Depends then on what gas price increases have been imposed on our european producers.

[fishyneck] 14/12/2005 18:38

You'd be very suprised how many millions of bricks are imported. I personnally was responsible for about 5m last year. I'll found out the overall figures tomorrow if anyones interested.

As M.T said there are numerous reasons for imports - size, colour, quality being the main but it can also be down to cost.

fn

[m.t.glass] 14/12/2005 18:06

"..will people start importing bricks - or do transport costs kill it?.."

I am decades out of touch now, but used to buy bricks from Holland and Belgium in the 1970s (sometimes just to trade for better ones that we actually wanted). Some of those had already been bought in from further east. I guess the costings have shifted around a lot since then.

Felix - I didn't realise that was the case with gas prices. I see local authorities and the like making hedging arrangements for fuel costs, but I guess that's more to do with just ironing out single-season volatility.

[felix99] 14/12/2005 17:41

Yuo cannot hedge gas prices MT - no one will do it. I spoke to FD many moons ago and best you can do is about one month forward.

Fishyneck - will people start importing bricks - or do transport costs kill it?

MBH is speicalist so wont be affected by this shouls it happen. Sold my last lot today at 102p. Not many left but was concerned the £10k was for 60 acres which I think is how MM's read it. Apparently its for 14 acres which stacks up to the £700k an acre we were hoping for. Will sit back and watch though as not sure with demand perhaps falling ( perhaps someone can put me right - but feels like property mkt softening so therefore brick demand should fall) what their ability to raise prices will be afore someone starts importing or something

[m.t.glass] 14/12/2005 17:06

Presumably the brickmakers owned by bigger multi-product groups are a bit more sophisticated in their hedging procedures? I guess the gas price rise will therefore impact some of the brick-only firms more suddenly and more heavily?

Most of my working life (in architecture & construction) was spent in the Midlands. On one of many visits to various Baggeridge kilns I recall them lamenting that the preponderance of high-fired engineering bricks and paviours within their range at that time put them at a disadvantage (when fuel prices rise) against those involved mostly in production of softer facing bricks. That still the case? I assume not, as most groups have absorbed smaller companies and broadened their ranges dramatically, so there is less of a contrast between them. Quite a few hardbaked brindles within the MBH catalogues ;o)

[fishyneck] 14/12/2005 16:32

Serratia,

Not an investor but have worked, as a salesman, in the brick
industry for many years. The major manufacturers - Ibstock, Hanson, Baggeridge
and The Brick Business are insisting on 10-12% increases. Normally we see around 5% and with a bit of gentle negotiation can be less. This time I'm
being told by all manufacturers that if they do not apply the full increases
then factories will close.

fn.

[serratia] 14/12/2005 16:18

Looking at one of the building research sites they stated that the uk made 2.7 Bn bricks in 2003 and used 138.7 m therms as energy in the kilns.This works out at 19.5 bricks / therm. MBH made 33.6m bricks in the first half year so they used 1.72 m therms.. On one of the competitor sites a brick manufacturer said gas prices have risen nearly 2 fold to £1 / therm say from 60p / therm.This means for 33.6 m bricks there would be an extra cost of £686k assuming a constant output in H2. First half profits were £628k before interest charges £208k after interest. On this basis they will lose £478k less whatever price increase they put through. Sales were £9166k in H1 so to get back the 478k they need an increase of 5.2% to breakeven. Broker forcasts are £550k for 2005 and £800k in 2006 ie they will make 550-208 in H2 = 342k so are they expecting price increases of 9%? Any comments welcome. I assume they'll get price increases through as the big players are also hurting. On this basis they won't go bust and the land is in for nothing. Not sure what happens though if the gas prices continue to rise.

[deanroberthunt] 14/12/2005 12:35

don't like the statement "gas prices must ease or we will go bust"!

was looking to buy in here for the first time, but will hold off now.

[m.t.glass] 14/12/2005 11:05

day

5 day

year

[m.t.glass] 14/12/2005 10:58

Timing of warning presumably to tie in with BGBK results?

They will have known that Baggeridge were bound to warn alongside results, and that their own share price would take a similar hit anyway. So I guess it makes sense to publish rather than leave people negatively surmising.

(Note: I see BGBK as nearest peer on account of both firms being heavily into UK-dug, UK-kilned clay bricks. Other rivals include a wider range of (unfired) non-clay bricks and bricks shipped in from abroad)

[alan russell] 14/12/2005 08:38

A trifle bemused by the market reaction to this news.

The profit warning re energy costs seems to be saying profits wiped out this year and next. However look at the Persimmon deal. £10M for seven acres = £1.4Mpa, allow for costs incurred say £0.4Mpa = £1Mpa, the deal covers 60 acres, say £60M profit over the next say fifteen years. This for a company with a cap of £34M (at the start of today).

OK the market usually lends much more weight to what's happening now than what will happen in 2008 & 2009 when the revenue will start to flow but a 19% opening drop seems a tad overdone. In the final paragraph of the RNS "...will add significant strength to our balance sheet....." and "....make the most of any opportunities which arise....". It seems that our chairman is envisaging acquisitions. Call that good or bad news - take your choice.

[wcjan25] 14/12/2005 08:18

other shoe dropping.

BUT 10m for 60 acres of the land

340 more acres for sale?

[pugugly] 14/12/2005 08:08

Property deal through but market does not seem to like it very much. Problems due to energy costs confirmed.

[serratia] 08/12/2005 22:39

I understand the dip----gas prices. Any reason for the recent jump,is it just returning to trend,or news on land deal?

[wcjan25] 28/11/2005 08:59

rumours at least one plant shut temporarily due to gas prices

[pugugly] 25/11/2005 13:52

Fall back - Query cost of fuel and cold weather may well hit brick maufactures very hard. MBH will not (imo) be insulated from these problems by the property/land cushion. May means it is not as badly hit as other brick makers but hit it surely will be.

[alan russell] 16/11/2005 17:40

The share price has performed much better than I had expected over the last few months. Presumably the market sees progress in MBH exploiting its land as it is difficult to detect any evidence to indicate increasing brick sales. The share price increase in the last week has been on modest volume but together with today's jump appears to be sending a positive signal IMHO.

To complement (or correct!) my haphazard buying and selling I try to stick to a few rules one of which says if a share I hold goes up 50% since I last bought, buy more. The princple is obvious - dump losers, reinforce winners. 116p triggered that rule, so that modest 1500 buy at the end of the day was yours truly. Time will tell.

[aderemi] 16/11/2005 17:16

nice break out

[hgiderek] 27/9/2005 17:44

News must be coming through - or hidden with those in the know.
Onward & upward !

[aderemi] 27/9/2005 15:28

breakout...

[mw8156] 27/8/2005 12:15

Fair write up in the IC but what makes MBH good value when BGBK IS high enough?