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Baggeridge unable to pass on cost increases.

Profits from brick making halved at Baggeridge Brick in the last six months after the Black Country group failed to pass on hefty gas cost increases and three works suffered production setbacks.

The Dudley-based company had warned investors in March of the problems and the shares crashed on the day but have since recovered. Yesterday they edged down 4p to 84 1 /2p.

Finance director Martyn Haines said despite the reduction in national stocks of brick and a nine per cent increase in house building in January, February and March, the company was still not able to pass on price increases.

'We expect things to improve but the second half will remain difficult,' he said.

Group sales rose 11 per cent to pounds 21.2 million in the half to the end of March, but operating profits from the building materials division fell from pounds 1.12 million to pounds 522,000.

Adding in profits from Baggeridge's landfill operations, group pre-tax profits fell to pounds 833,000, giving 1.42p of earnings per share. The dividend is maintained at one penny.

Production problems at the Rudgwick, Waresley and Sedgley works compounded the problems. At Rudgwick a new management team has been installed to ensure a new machine, installed to produce more moulded stock bricks - softer edged and traditionally used in the South - would be fully utilised.

'Like all things to do with manufacturing, there is not going to be an overnight change, but things are improving,' said Mr Haines.

At Waresley, stock bricks were again the problem but this time not enough machinery was installed to ensure the right level of production efficiency.

Baggeridge now plans to invest another pounds 1 million in equipment by early next year to increase capacity to a more appropriate level.

The third works at Sedgley had introduced the new stock brick production process, but found demand for the yellow stock brick it made was weak At the end of the half, Baggeridge's debts stood at pounds 7.4 million, representing a 14 per cent gearing to shareholders funds.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:May 16, 2002
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