The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
An article regarding the freighting of some of Breedon's materials for those interested in the company.
https://www.railfreight.com/railfreight/2020/07/17/breedon-aggregates-adds-to-bulk-flows-from-uk-quarry/?gdpr=accept
Bree make a nice step forward, just add this acquisition to the pile of capability to deliver to UK build PLC over the coming 24 months, steady rise to follow, I think these may go as high as £2 prior to any windfall tax being talked about for the UK house builders
Packaging is a hugely expensive outlay for any business that sells pre-packaged product.
I remember one potting compost manufacturer telling me that they had more money tied up in packaging than product in their yard.
The problem is that they have to order in very large quantities for each product in their range and delivery times are always excessive in the best of times, at the moment they are intolerable with product being sent out in plain packaging or not at all.
Pallets don't seem to be a problem at the moment.
Hi StoneRoses, I remember you were early to the board raising these issues. I recall your suggestion that haulage could be a profitable element in the supply chain., but this element surprised me.
Last week, Hanson announced a reduction in allocations. The Hanson Packed Products director said, “cement shortages are not the only issue”.
“In the longer-term we face issues on the availability of packaging (paper and plastic) due to global demand. We have been notified by our suppliers that they could have difficulties sourcing polymers and kraft paper to manufacture cement bags. Pallet availability is also a concern given the increase in demand across all timber markets affecting availability and pricing.”
wonder if Breedon has a good stock of cement bags. Will it get a mention at the interims?
Agree its a sizeable target for any possible suitor but Scale and Geographical spread is essential for as you say the international players
CRH been a fine example of this
Yes -even these huge companys need gearin up such large opportunities - but there's immediate and huge cash returns to offset these new borrowings
And as it is said - the only constant in life and for business too is change
https://www.bbc.co.uk/news/business-57247757 As stated in the original post, this lack of materials, is and will have a major effect on all housebuilders etc...
I think BREE are too big for a take over unless an International interest.
Not sure what their plans are but there is a plan.
The problem any competitors will have if eyeing Breedon up, will be the CMA. Last years purchase of some Cemex assets took months because the deal had to be approved by them. Any organisation big enough to even think of bidding for BREE, will have the same issues.
Is Their a view out there that because of Breedons huge reserves of raw materials neccessay for both the UK and Irish infrastructural markets -the company could prove to be a strategic add -target on for some of the larger groups
Strong management and increasing market share add valuably to the mix
What could shareholders expect by way of price paid or would share swaps in that event be acceptable
Hi Londoner7,
Thank you for the reference.
ATB
L3Trader
p.s.: As for that TU in the other bb, it did not meet my expectations...
Hi L3Trader, thanks for your comments.
I think this is the book:
The Art of Execution: How the world's best investors get it wrong and still make millions in the markets
By Lee Freeman-Shor
It's a quick and easy read and I liked the fact that it captured many on my own trading experiences, and helped me correct some of them.
Hi Londoner7,
This is an investment I am very happy with. I do not even look at it regularly. That is how relaxed and optimist I am about it.
I still owe you a reply to your reply to my post/reply to a post in the Winter. Thank you for you contributions to this BB.
At some point you mentioned a book you had overseas. I was wondering if you could remind me the title.
Thank you.
ATB
Dunno - seems like the current steady rise is petering out. Future probably linked to infrastructure projects.
Just happened on a site/ app called Simply Wall St. Does anyone else trust or use it. They're saying Breedons are undervalued by 34 percent and the share price should be 150 ish.Thoughts anyone?
The same CI posting includes news on a new road south of Carlisle.
Morgan Sindall signs for Carlisle Southern Link Road (theconstructionindex.co.uk)
I wondered what Breedon had in the area that could support the works.
Low Plains Quarry, is 10-15 miles south of the new road. Breedon acquired the quarry as part of the Tarmac exchange in 2018, and said at the time, “Low Plains, between Carlisle and Penrith, is a major producer of sand and gravel for supply to the construction markets of the north of England.
Alan Mackenzie, managing director of Breedon Northern, said the construction materials group which operates across the UK and Ireland, was delighted to welcome Low Plains and its staff.
He said: “Low Plains is a strategically valuable quarry with significant sand and gravel reserves which will supply both the local market and our own ready-mixed concrete plants in the region.
"We look forward to working together for a successful and profitable future.”
Looks like, right place right time. “The works are due to start on site in spring 2022 and it is anticipated the construction of the road will take approximately two years to complete.”
I picture a scene from the Battle of Britain where the RAF WAAFs position and develop their resource in response to incoming German bombers.
In Breedons case, similar hard hats but less urgency. The Carlisle Southern Link Road is flashing amber, and Breedon are reviewing their local resource with adjustments to capital spend.
A scene played out across the land!
It's a quiet day in Linlithgow. ;-)
An article in today's Construction Index supports comments made by a poster a couple of weeks ago, 'Issues'.
I'd guess it's good news if you are in the business of supplying materials. It will be interesting to hear Breedon's commentary at the half year. They usually highlight key projects and areas of activity. I'm even more optimistic on a revenue boost above current broker consensus.
https://www.theconstructionindex.co.uk/news/view/hs2-blamed-for-materials-shortages
Bought another £5k of these to add to my £3k holding. Going to be getting my total holding up towards the £20k mark in the near future. Great company to have shares in.
Thanks to the contributors from the industry.
I understand some of the replies querying the comments but I think it's important to also understand that the contributions are made from personal perspectives. Putting these together I get the sense that demand for Breedon's products generally should be good. On material shortages there's a fundamental difference between the quarrying of aggregates and the production of cement. Breedon has the largest cement plant in the UK and a second in Ireland that together produce c2mT. For maximum efficiency these plants will run flat out, only being shutdown a couple of times a year for kiln maintenance etc. Variations from one year to the next are probably within =/-10%. In addition Breedon operates 4 cement import/export terminals. The latest in Lieth Scotland which may be behind the reference to shipping cement from Scotland to England.
But looking at the production numbers it's interesting to note that Breedon produce more than twice the cement they require for their own concrete plant, though as spogbat points out regional issues might mean the Breedon's cement isn't necessarily in the right place. I know that some plant uses non Breedon cement for logistical reasons. But all in all Breedon has a good supply of cement. I noted cement was called out positively in the latest update.
Key to margins is the ability to increase price over cost. Lafargholcim, the international materials supplier reported numbers this morning that pointed to good price increases over cost.
Only a few comments on Europe, but they sound positive:
Excellent month of March with strong volumes in all
business segments
? Strong pricing trends overall
? Improving activities in the UK, continued strong demand
in France
? Over-proportional recurring EBIT growth vs Net Sales
i work in the construction industry and there are various supply issues at present due to demand and covid related problems ,covid caused many suppliers to shut or mothball sites especially relating to concrete and there were many redundancies in the industry and i personally think companies have been caught out with the upturn so quickly. i think this is a regional issue at the moment especially cement shortages, there are also issues relating to transport with 12 month waiting lists for new vehicles , material shortages in some areas , planning consents are getting harder to pass through, i know of several quarries that could sell more material but are running at maximum output levels due to there legal requirements . some asphalt plants are only allowed to operate so many weekends and nights a year , looking at breedon specifically i think buying the cemex sites when they did was a very good move especially relating to high psv hardsone quarries and greater asphalt capacity , im expecting m&a activity to also pick up in the second half of the year also with bolt ons in certain areas . its looking positive but there are issues to overcome
Nice to see £1 breached (well ahead of schedule too). Given all the post-covid infrastructure projects planned, plus the dividend, there would appear to be plenty of growth left in the market cap.
I drive for Breedons, and certainly in my area, there is no issue with supply of materials for concrete, haven't heard of any across the country either. There is an issue with supply from external sources, but nothing to worry about. Someone mentioned Tarmac, they have closed down 4 plants in Eastern England. This has placed higher demand on Breedon concrete as the Cemex remains aren't functioning well. To be fair Breedons didnt buy that much from them here, but one important acquisition was another Quarry. I came off furlough after 5 weeks last year and haven't stopped. Demand is massive in the wake of 2 of our main opposition leaving the local market.
Agreed Quantum11. The key to Breedon's continued success is their bank of materials assets. I read somewhere that it stands at 40 years plus at current levels of operation. They are not content with that, they also looking to acquire more. The other threat is climate change. Breedon are working on that and are in the process of developing greener cement. Also they have started work on recycling asphalt, mixed with new at 30%. Hopefully the machinery required to do this will qualify for the 130% tax relief. Therefore enabling them to expand this process over the next two years.
Hi Fastduckharry, yes this was my thoughts when I read their results. They have a mass amount of everything on tap therefore, no issues for them what so ever. Albeit other companies might struggle but not them.
Below taken from Breedon's 2020 Annual Report:
KEY ASSETS
•Substantial permitted mineral reserves and resources
•Extensive network of quarries, rail-linked aggregates depots, asphalt plants, ready-mixed concrete plants and concrete products manufacturing facilities throughout Great Britain
•Nationwide fleet of delivery vehicles for all products
•Sizeable contracting services operations
Hi Quantum. Having reserves is one thing. But you need to be able to get it out the ground, process it and haul / transport it to customers.