Construction materials

James Latham profits rise amid shortage of building materials

  • Operating profit jumped 19% in the year as at March 31 to reach £ 19million
  • The average price of the group’s products increased by 7 percent

The initial disruption due to the pandemic saw James latham(LTHM) revenue fell for the fifth year on a year-over-year basis between April and August 2020. But as demand recovered, the wood products distributor actually increased its sales by just over 1% as of 31 December. March to reach £ 250million.

The group sells to professional customers rather than the general public, supplying everything from wood-based panel products such as plywood to MDF moldings such as baseboards. Unsurprisingly, its largest market is home construction and construction, with traders and carpenters typically accounting for around two-fifths of overall sales.

Comparable volumes rose 7% last year and the group says further volume increases were limited by the introduction of quotas by manufacturers. While James Latham focuses on customers in the UK, the need to import products means he is exposed to the dynamics of global commodity markets.

Building materials have been scarce over the past year, causing prices to skyrocket. This was especially true for lumber, which rose from $ 405 (£ 565) per thousand board feet (bft) in early 2020 to a high of $ 1,686 in May 2021. The North America was one of the main drivers of the lumber increase. prices as sawmills have struggled to keep up with the boom in home building, home renovations and DIY projects.

James Latham says the prices for his products started to increase “significantly” in the second half of the year and by the end of March they were on average 7% higher than a year earlier . This meant that while revenue growth was rather calm, operating profit jumped almost a fifth to £ 19million, with the margin increasing 1.1 percentage points to 7.6 percent.

Lumber prices have fallen dramatically over the past month as sawmills increase production and some customers postpone purchases. But it remains above pre-pandemic levels at $ 891 per thousand bft and Samuel Burman, deputy raw materials economist at Capital Economics, estimates that “overall lumber consumption will remain high over the coming months. “.

James Latham chairman Nick Latham said “the current difficult supply situation is expected to continue until 2021, but visibility beyond is much more uncertain.” For now, high demand levels have continued into the new fiscal year and the group expects margins to remain high over the coming months.

James Latham’s shares rebounded strongly from the “corona crunch” and are now trading above pre-pandemic levels. The group has minimal borrowing and with net cash more than doubling to £ 24million, it increased its final dividend by 55% to 15.5 per share. To buy.

Last seen IC: Buy, 864p, Nov 25, 2020

JAMES LATHAM (LTHM)
ORDER PRICE: 1,131p MARKET VALUE: £ 222 million
TO TOUCH: 1 130-1 132p UP TO 12 MONTHS: 1,160p LOW: 753p
DIVIDEND RETURN: 1.9% P / E RATIO: 15
NET ASSET VALUE: 621p NET CASH : £ 23.8million
Year to March 31 Turnover (£ m) Profit before tax (£ m) Earnings per share (p) Dividend per share (p)
2017 199 13.8 56.0 15.4
2018 215 15.2 64.4 16.6
2019 235 15.3 63.1 17.9
2020 247 15.7 63.1 15.5
2021 250 18.6 75.4 21.2
% cash +1 +19 +19 +37
Ex-div: August 05
Payment: August 27


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