Revenue and profit have slipped at Eurocell, the manufacturer, distributor and recycler of window, door and roofline PVC products, according to half year results for the six months ending 30 June 2023.
Against a “challenging market backdrop, with particularly severe decline in new build housing,” first half profits were down “as expected.” Reported profit before tax sat at £3.5m, dropping from £15.7m in the first half of 2022.
Meanwhile the firm posted revenue of £184.4m, declining from £188.8m.
With further deterioration in market conditions, Eurocell’s full year performance is now anticipated to be below previous expectations.
Darren Waters, Chief Executive of Eurocell plc, said: “Market conditions in H1 2023 became more challenging than we had anticipated, on the back of a sluggish new build housing market and lower RMI activity, with the CPA July update forecasting declines of 19% and 11% respectively in these sectors. Against this backdrop and an exceptionally strong comparative period, we delivered some resilience in the Group’s sales performance in the first half, with volumes down 6%, and improved cash flow.
“As expected, H1 profits were down on the prior period. Lower market volumes have resulted in an increasingly competitive environment and margin pressure in the branch network. First half profits were further impacted by recycling feedstock prices, which were significantly higher than H1 2022.
“With the decline in market volumes and a tough outlook for the balance of 2023 and 2024, we acted quickly to lower operating costs and focused on efficient working capital management. In addition, we continue to seek operational efficiencies, for profit and cash flow improvement, the benefits of which we should start to see next year.
“We anticipate that profits in H2 will benefit from lower input prices as well as the operational cost savings already secured. However, with another base rate increase implemented and the prospect of more to come further impacting upon consumer confidence, market conditions have deteriorated since the beginning of August, meaning that we now anticipate full year performance will be below our previous expectations.
“On becoming CEO in May, I initiated a review of our strategy, including the future size and shape of the branch network, customer proposition and other business structures, and I expect this will identify more opportunities for growth and efficiencies. In addition, our pipeline for new fabricator account wins remains positive, supported by a net reduction in UK capacity following the announcement that Duraflex intends to exit the market in September.
“Looking further ahead, the UK construction market continues to have attractive medium and long-term growth prospects, driven by the structural deficit in new build housing and an ageing housing stock that requires increased repair and maintenance. Overall, I believe the actions we are now taking leave the business well positioned to benefit from a recovery in our markets which will, over the medium-term, drive sustainable growth in shareholder value.”
