The Lemon Fool

Forterra (FORT)

Manufacturers of building products for the UK market

1. Bricks
2. Blocks
3. Precast Concrete Products
4. Roofing Products
5. Paving Products
6. Facades

Trade Names

1. London Brick
2. Ecostock Brick
3. Butterley Brick
4. Cradley Special Brick
5. Red Bank
6. Thermalite
7. Conbloc
8. Bison Precast
9. Formpave

Headlines

1. 17 Manufacturing Sites
2. 600 Building Products
3. 1,800 Employees
4. Main income is from brick manufacturing
   
   
   1. 9 brick manufacturing factories
   2. All based next to clay quarry resource
   3. 50 years production of mineral resources
   4. UK does not make enough bricks to satisfy demand. Shortfall is approximately 40% although this varies annually.
   5. Forterra will have access to home market through new factory replacing some imports
   
   
5. New Desford factory costing £95m is now operational. Boasts best efficiency of any competitor in Europe
   
   
   1. Old Desford capacity = 60m bricks pa. New factory 180m pa.
   2. CO2 25% less than old factory
   3. Increases overall Forterra production by 22%
   
   
6. Wilnecote factory upgrade of £27m will produce architecturally specified bricks. Margins are favourable for such products
7. Accrington factory improvements of £12m will allow 480m brick slips to be made at source pa. Grenfell fire has pushed specifiers away from timber cladding. Brick slips are an obvious replacement.

Capital Investment Year Ending 2022

1. Share buy backs 40m
2. Dividends 24.2m
3. Desford & Wilnecote 33.6m
4. Investment in strategic reserves at Swillington. New factory planned

The Future
Strategy is easily articulated as three pillars designed to provide sustained earnings and cash flow growth through:

1. expansion of capacity, enhanced efficiency, and sustainability
2. range expansion
3. new product innovation

This isn't a huge business. It seems well placed to grow and they claim to have a seriously strong moat. They have existing sites and estimate entry into their sector for competitors would take ten years due to planning and other requirements. By increasing their efficiency, improving sustainability and capitalising on recent opportunities created by the likes of Grenfell & Brexit they could be worth a further look.

AiY(D)

AsleepInYorkshire wrote:By increasing their efficiency, improving sustainability and capitalising on recent opportunities created by the likes of Grenfell & Brexit they could be worth a further look.

Agreed. I don't own but Forterra is one of the stocks I keep track of and it looks interesting to me here. There are other UK companies that look interesting now too. Bar 2021, the company has earned an attractive ROE since listing in 2016 especially for producing what sounds like a commoditised product. I expect the road might be bumpy but if I didn't need the cash right now I would be tempted.

The dividend data below looks odd. No ordinary dividends being deducted from retained profit but dividends per share being shown in 2018 and 2019. According to my records the company has paid dividends each year since listing but has not hesitated to reduce the dividend when needed so perhaps not one for those needing a dividend they can rely on each year.

Pendrainllwyn

I’m following Warren Buffett and getting ready for a stock market crash

Right now, for example, I think Forterra shares are trading at a good price. Following Buffett’s approach doesn’t mean keeping my money in cash and waiting for a crash to try and get a better price.

Well at least my thoughts were backed up with a little more substance .

AiY(D)