The problems facing suppliers to the construction sector has prompted a leading broker to downgrade the prospects of Austrian company Wienerberger, parent of Black Country brickmaker Baggeridge.
Collins Stewart said that the company, the world’s largest brick producer, faced “an uncertain outlook”.
In a note it said the company had ridden the downturn very well so far, helped by a booming Eastern Europe.
“However some of these markets are beginning to lose their lustre. The 400 million euro rights issue cuts eps by 10 per cent this year. Bricks are sold almost entirely into housing, making the group increasingly vulnerable to the credit crunch in Western Europe,” it said.
It added that housing markets in the UK and US were “clearly plummeting” and acquisitions such as Baggeridge, which it took over last July, had impacted on the group. “US brick demand has been more stable than the wider housing market to date, but we fear this may not last,” the note continued, adding that profits were expected to tumble sharply in these regions.
Wienerberger has already acknowledged the problems and last month closed two quarries in the south of England and warned that if the situation worsened then further cutbacks may be necessary.
Collins Stewart said the that group’s other Western European markets, Germany and Holland, where there are also problems, were merely “stable”.
Opportunities within Eastern Europe may be the group’s salvation.
“Almost 60 per cent of group profits come from Eastern Europe. Housing has been soaring in several countries, particularly Poland and Russia.
“The group is adding 10 ten per cent to its regional capacity this year. However, markets in the Czech Republic and Hungary are slowing,” it said.
Poland’s red-hot market last year, where at one stage there was a 14-day waiting period to buy a brick, allowed Wienerberger to push prices up in neighbouring countries.