Brick maker hedges energy costs

Michelmersh Brick Holdings is mitigating inflation risk by hedging its expected future energy costs.

In the company’s annual results presentation today, joint chief executives Frank Hanna and Peter Sharp explained: “As we enter 2022, the ongoing higher inflation environment continues to impact supply chain and input costs and the group is working hard to manage these costs. Given the high energy requirements for brick manufacturing, our energy price hedging policy remains incredibly important to ensure that we are well placed to manage the impact of gas price volatility over the medium term, with our requirements materially hedged for 2022 with further contracts into 2024. We will remain watchful of higher input costs and will respond in collaboration with our customers, if necessary, to ensure that we are well placed to manage any further margin pressures.”

They added: “With the elevated inflation risks across our manufacturing cost base we will continue to monitor the appropriateness of our portfolio pricing to ensure that we are in a position to offset any further margin pressures. Hedging the costs of our future expected energy requirements remains an important strategy for the group to mitigate the inflation risks and we have secured over 90% of the group’s energy requirements for 2022 with further energy contracts in place for a portion of our expected requirements in 2023 and 2024 in line with this risk based approach.”

After a slight stumble in 2020, brick maker Michelmersh returned to growth in 2021.

Michelmersh Brick Holdings has reported 14% growth in revenue for the year to 31st December 2021, turning over £59.5m (2020: £52.0m). Pre-tax profit was up 41% to £9.7m (2020: £6.9m).

Turnover was also 11% up on the 2019 pre-Covid £53.3m but pre-tax profit was a little below 2019’s £10.4m.

Chairman Martin Warner said: “We are operating in a sector which is fundamental to the post Covid recovery. We have entered 2022 with a strong and balanced order book and are continuing to see positive order intake momentum from our broad customer base with high demand across all our key markets. The ongoing Covid pandemic, together with the elevated inflation risks in the UK economy, mean that we operate in a more challenging environment as we enter the new financial year. However, we remain focused on delivering a quality product and service to our customers and have worked collaboratively to deliver price increases across our premium portfolio to offset higher cost inflation.   

“The positive momentum and the benefits from the longer-term fundamentals in our sector provide a resilient foundation given the current uncertain macroeconomic conditions and the board remains confident in the strategic outlook of the business.”

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