Source - Alliance News

Builders merchant Travis Perkins PLC on Wednesday warned that falling prices of commodity products have hurt gross profit and narrowed its profit margins, causing it to cut earnings guidance.

Shares in the Northampton, England-based company were down 9.0% to 732.98 pence in London early on Wednesday. The wider FTSE 250 index was down just 0.3%.

Travis expects 2023 adjusted operating profit of £175 million to £195 million. This is down from previous guidance of £240 million, provided in August at the time of its interim results. It also will be down at least 34% from £295 million in 2022.

At the half-year stage, adjusted operating profit was £112 million on revenue of £2.47 billion, down 31% and 2.5% respectively from a year before.

Travis said revenue and like-for-like sales both were down 1.8% in the third quarter ended September 30 compared with the year before. It said the slowdown in the UK new build housing and the domestic renovation, maintenance and improvement markets seen in the first half continued into the third quarter.

In the Merchanting division, third-quarter revenue declined by 3.4% on a year before, which Travis noted represented a ‘modest improvement’ on the first half. It said this was driven by a 3.1% decline in pricing due to ‘strong deflationary pressures on commodity products which have significantly impacted on gross profit and margins’. Volume was down only 0.3%.

The Toolstation business fared better with revenue up 7.3% in the third quarter, including 4.4% like-for-like growth. Toolstation UK saw 7% revenue growth in the recent quarter and Toolstation Europe 9%.

‘Market conditions remain challenging with continued weakness across new build housing and domestic RMI,’ said Chief Executive Nick Roberts. ‘Deflation on commodity products has also been greater than we had anticipated.’

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