Construction materials

Grafton expects building material prices to continue to rise

Prices for major building materials will continue to rise next year, Gavin Slark, managing director of the owner of Woodie’s DIY Grafton Group, predicted on Wednesday.

In an interview after Grafton reported that profits for the first six months of the year hit a record € 167 million, Mr Slark said rising building material prices added 7 percent at group costs this year.

He predicted that the trend, which affected the entire industry, would continue into 2022, but added that the inflation rate appeared to be slowing.

Mr Slark noted that the prices of cement, plaster, timber and steel had risen the most this year. “Part is due to shortages of raw materials, part to supply chains. It is now much more expensive to ship products from the Far East.”

He added that European suppliers are also sending goods to the United States to take advantage of higher demand there, especially for lumber.

Grafton’s managing director confirmed that timber prices had increased “significantly” in both Ireland and Britain.

Delays in licensing have affected tree felling in the Republic, which supplies both markets, adding up to 60% to the price of many wood products, according to sawmills.

Builders affected by the increases calculate that they have added € 15,000 to the costs of building new homes.

Besides lumber, manufacturing and supply chain disruptions and increasing demand have pushed up the prices of many construction products this year.

Balancing act

Mr Slark admitted that some increases were too high for Grafton to absorb, as he handled the problem with others.

“We always have that balance between what we take on the chin and what we pass on to our customers,” he said. “But we have to keep our prices credible.”

Grafton, headquartered in Ireland, best known here as the owner of Woodie’s chain, has builders’ dealers and sourcing companies in this country, Britain and Europe.

The group said its profit before tax increased 384% to 143 million pounds sterling (166.8 million euros) in the first six months of 2021. Sales rose 46% to 1.03 billion of pounds sterling, while operating profits soared 257% to 152 million pounds.

Figures exclude results from its UK trading business, which includes Buildbase, Civils & Lintels, Timber Group and others, which Grafton is selling for £ 520million.

The sale to Huws Gray, a UK company owned by US investment giant Blackstone, is expected to be finalized by the end of February, according to Slark.

He noted that Grafton’s auditors recommended that the group therefore treat the results of the trading activity as “discontinued operations”.

Mr Slark confirmed that Grafton was likely to use some of the money from the sale to buy other businesses. “Acquisitions are an integral part of the plan for the next few years,” he said.

Bolted

He pointed out that there were acquisition opportunities in Europe that would expand the group’s reach to new countries, while there were also smaller companies that could be ‘bolted’ into Grafton’s existing operations. .

Grafton recently bought out Finnish personal protective equipment manufacturer IKH for 200 million euros, giving it a first foothold in the northern European country.

Commenting on the first half results, Mr Slark noted that Woodie’s and Irish builders Chadwicks’ supplies business had a “very good performance” in the first six months of the year, despite a lockdown in the first quarter. .

He pointed out that Chadwicks’ performance came despite a construction stall that lasted the entire first quarter, while Woodie’s benefited from an increase in DIY spending.

“People were spending more time at home and more time at home,” Slark said.

Group figures show the combined Irish companies doubled their operating profit in the first half to reach £ 31million this year, from £ 15million in the same period in 2020. First half profits in 2019 were £ 23million.

Grafton will pay an interim dividend of 8.5 pence per share, earning investors £ 20.4million.


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