Building Merchant to Source U.K. Supplies Amid Brexit Squeeze

(Bloomberg) -- Travis Perkins Plc plans to source more materials from British suppliers as a weaker pound since the Brexit vote weighs on the building merchant's supply chain.

“The sharp decline in the value of Sterling since June 2016 has created cost pressures on imported goods and materials,” Travis Perkins Chief Executive Officer John Carter said in a statement Thursday. The Northampton-based company expects higher prices to offset a potential reduction in volume in 2017 and said it will likely pass on cost increases to consumers.

The comments indicate that the U.K. construction sector continues to be hurt by higher costs and lower demand. Other suppliers like SIG Plc and Grafton Plc have recently warned about difficult trading conditions since the referendum last year. U.K. home building in January increased at the slowest pace in six months, Markit also said today in a report.

Travis Perkins fell as much as 7.4 percent, the most since October 19, and was the worst performer on London's mid-cap FTSE 250 index. SIG dropped 5.1 percent and Grafton shares were down 2 percent at 10:45 a.m. in London.

“2017 outlook comments are cautious in tone with LFL sales expected to be flat at this stage,” Canaccord Genuity analysts Aynsley Lammin and Matthew Walker wrote in a note to clients, adding that profit estimates for the year might be cut. The company's adjusted earnings for 2016 declined 3 percent to 120.4 pence a share.

To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net.

To contact the editors responsible for this story: Adveith Nair at anair29@bloomberg.net, Niveditha Ravi