Shares in Breedon Aggregates climbed almost 3% after the firm said full-year profits were likely to come in ahead of City expectations.
The company, which has its Scottish headquarters at Ethiebeaton in Angus, said the group’s recent trading performance had been “very encouraging” and it was on track to beat financial forecasts for the full year to December 31.
In an upbeat update to the markets, the company also said it had “reason to be optimistic” for the year ahead on the back of new forecasts from the Mineral Products Association which suggested 2% to 4% growth in aggregate volumes next year, a 3% to 5% increase in the ready-mixed concrete market and up to 4% growth in asphalt volumes.
Breedon said the forecasts, coupled with a prediction of a return to growth in UK construction output, were more positive than they had been for a number of years and gave the group confidence that it would make further progress next year.
Turning to the current year, the company said it had been a strong overall trading period.
“Sales volumes of aggregates, ready-mixed concrete and asphalt are all ahead year-on-year in both England and Scotland, assisted by contributions from our acquisitions of Aggregate Industries’ operations in northern Scotland and Marshalls’ quarries in England,” the firm said.
“Group sales revenue in the second half of the year has been stronger than in the first half, and the full-year EBITDA (earnings before interest, taxation, depreciation and amortisation) margin is expected to be ahead of the prior year, driven by continuing improvement in the underlying business and the benefit of acquisitions.”
However, one major issue that remains to be resolved is a Competition Commission inquiry into Breedon’s £34 million acquisition of Aggregate Industries UK’s Scottish quarries and production facilities.
The Office of Fair Trading referred the deal which saw Breedon take control of six active quarries, four asphalt plants and seven ready-mix concrete sites in Tayside, Fife and elsewhere across Scotland to the watchdog in September after concluding it could substantially reduce competition in the supply of primary aggregates, asphalt and ready-mix concrete in a number of regions north of the border.
Breedon acknowledged it may be forced to sell off a small parcel of assets in order to assuage any concerns raised by the Competition Commission in its upcoming ruling on the case.
“Both the English and Scottish businesses continued to make good progress this year, helped by a general improvement in construction demand and a continued focus on management of costs, prudent investment and careful selection of work,” it said.
“The Competition Commission’s investigation into Breedon’s acquisition of Aggregate Industries’ Scottish operations is continuing, and discussion regarding their findings is likely to commence in January.
“Breedon continues to believe that there are only minor issues in one product area, which may require disposal of a limited number of individual assets.”
The firm the largest independent aggregates business in the UK after the four global majors employs around 1,000 people across the UK, and its overall mineral reserve stands at approximately 400m tonnes.#