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Eurocell (LSE:ECEL), a UK-based manufacturer and recycler of PVC window, door, and roofline products, reported a notable rise in profits for the first half of the year on Wednesday, despite a decline in sales.
The London-listed company announced a 33% increase in adjusted profit before tax, attributed to effective margin management and lower input costs, including reductions in electricity and PVC resin prices.
Despite this profit increase, group sales fell by 5% compared to the same period in 2023. This decrease reflects a subdued environment in the repair, maintenance, and improvement (RMI) sector, as well as persistent challenges in the new build housing market.
In response to the challenging economic conditions, Eurocell remains optimistic about meeting its full-year targets, citing progress with new strategic initiatives. The company has been proactive in focusing on shareholder returns, completing a £10 million share buyback and initiating a new £5 million buyback program. Additionally, Eurocell has increased its interim dividend by 10% to 2.2p per share.
Operationally, Eurocell reported £2 million in cost savings resulting from a restructuring in the second quarter of 2023. The company has also made strides in sustainability, with recycled material now constituting 33% of its PVC production.
The firm is advancing its strategic growth plans, including expanding its branch network, increasing sales of windows and doors, and leveraging strong demand for garden rooms, which generated £3.6 million in sales during the first half of the year.
Chief Executive Darren Waters acknowledged the tough trading conditions in 2024, noting that macroeconomic uncertainty, adverse weather, and the general election have impacted the company's key markets. Customers remain cautious, leading to lower investment in home improvements and reduced activity in the residential construction market. Consequently, first-half sales were 5% lower compared to the same period last year.
Despite these challenges, Waters highlighted a 33% increase in adjusted profit before tax for the first half of the year. The company has continued to effectively manage its gross margin and cost base, benefiting from reduced input costs. Waters remains confident in achieving the full-year targets, supported by the early progress of the new strategy aimed at building a £500 million revenue business with a 10% operating margin over five years.
The UK construction market is expected to offer attractive medium and long-term growth prospects, driven by a structural deficit in new build housing and an ageing housing stock requiring increased repair and maintenance.
As of 1050 BST, Eurocell's shares were down by 0.83% to 143.8p.
