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Good day, and welcome to the Ibstock Trading Statement Analyst Conference Call. At this time, I would like to turn the conference over to Joe Hudson. Please go ahead, sir.
So good morning, everyone. Welcome to our Q3 trading and strategic update. I'm joined today, as usual, by our CFO, Chris McLeish.If we turn to the agenda, we'll start to Chris providing an update on Q3 trading, and I'd then like to give more information on our announcement to create a new business unit, Ibstock Futures and the first initiative linked to Futures features which is an investment to build the U.K.'s first automated brick slip systems factory. We'll then open up for questions. So with that, I'll hand over to Chris.
Thanks, Joe, and good morning. I am pleased to say that the group delivered a strong Q3 performance, supported by robust demand from our core markets. The supply chain impact, which we highlighted back in August, were well managed with both divisions delivering a resilient operational performance. We increased our selling prices in both divisions in response to significant cost inflation in the categories of materials, energy and freight.As anticipated, this cost inflation as well as the availability of freight and labor led to modest reductions in divisional EBITDA margins with the contribution from selling price increases being realized incrementally through the second half. We remain delivering EBITDA for the 2021 year, in line with our previous guidance. We also continued to make good strategic progress during the quarter. The project to redevelop our Atlas wire cut factory in the West Midlands is progressing well. with planning approval secured equipment orders placed and construction underway.As we look towards 2022, our energy hedging policy positions us well against the backdrop of elevated prices with around 80% of both gas and electricity for next year now locked in. Overall, we remain confident in our ability to make significant further strategic and financial progress next year. With that, let me hand back to Joe.
Thanks, Chris. So this is an exciting day for our company as we launch Ibstock Futures, a business unit focused on delivering multidimensional growth across fast-growing segments of the U.K. construction sector. Let me start by reminding you of the strategic context for today's announcement, which we presented to you before. We've got a strong advantaged core business across both our clay and concrete divisions and this delivers structurally high margins and generate strong free cash flows. Our operational strategy is structured across the 3 pillars of sustain, innovate and grow, continues to define how we execute. And we see 2 distinct tracks of growth opportunities, deploying capital in a disciplined way across each.Firstly, in capacity, efficiency and sustainability enhancements to optimize the performance of our existing business. And secondly, on innovation and extension into new markets to diversify our revenue base within the construction sector. I've talked before about the 2 strong forces of change that I believe will transform the markets we operate in. An intensifying focus on sustainability and a new wave of industrialization of construction. Our announcement today describes how we will address these new opportunities and provides further detail on the markets we'll initially focus on. I'll come back to provide more detail on these markets in a moment, but let me first outline how we are investing for diversified growth.We see significant areas of the U.K. construction sector where we have limited presence and these areas are undergoing rapid transformation. Capitalize on the opportunities presented by these markets. We recognize that we'll need to operate with more agility and pace and foster a different culture of innovation and collaboration with partners in the supply chain. To do this, we're announcing Ibstock Futures, a new focused business unit, leveraging on the strength of our existing business whilst operating with an independent remit to scale rapidly across faster-growing segments of the construction sector. Ibstock Futures will be targeting technologies products and solutions aligned to the mega trends of sustainability and industrialization of construction. We've recruited leadership for this business with the right blend of commercial, innovation and strategic skills, and we'll be scaling our capabilities further over time. This is a significant step in our strategic vision for the group, and we have done considerable work to identify the market sectors products and technologies that represent the strongest opportunities for Ibstock.The brick slip project, which I'll describe in a bit more detail shortly, is expected to deliver significant incremental growth for the business but this is just one of the initiatives we have in train already for Ibstock Futures. We have substantial investment capacity to support our ambition for this new business unit and through a combination of innovation, partnership and acquisition initiatives, we'll have a clear road map to scale Ibstock features rapidly over the next 5 years.So let me outline just a couple of the market segments, which this new business will be focused on initially. If we look at the off-site overall, the U.K. construction sector is around $150 billion of market size. And with this, the off-site or modular market is around $10 billion, of which the individual components account for just over $1 billion. We've seen over 30 new entrants enter this market since 2015. And with the likes of Countryside Berkeley Homes, we link ilki Homes, all looking to design and build panelized facades and volumetric units using advanced industrialized processes. The government has a target to produce 25% of new affordable U.K. homes through these modern methods of construction with industry experts projecting that over the medium term between 60,000 and 75,000 new homes annually could be delivered using modern methods of construction.Turning to look at the mid high-rise facades market. Overall, this market is worth around $15 billion, including the value of the recladding within the RMI segment. Brick and masonry currently accounts or around half of these facades and the cladding components themselves present us with an addressable market of some $1.5 billion. The need for safe noncombustible cladding alternatives has been driving an increasing preference for brick and masonry facade in this market. Based on Glenigan data, there's been a 40% increase in penetration of break and masonry clad applications over metal since 2018 on buildings over 11 meters. And overall, the cladding market in mid high-rise construction is expected to grow by high single digits over the next 5 years. Taken together, the addressable opportunity for these markets today is twice the size of the existing U.K. play brick market. This, therefore, represents a big opportunity for Ibstock to grow, and we believe that with Ibstock Futures, we have the competitive position and platform to do so successfully.So against this backdrop, let me now focus on one of the product categories where we see a compelling near-term opportunity to leverage our unique strengths. Brick slips or clay brick slips with or clay bricks with an adapted thickness for use in a variety of cladding systems across both off-site and on-site construction. The attractive, visual aesthetic, combined with their flexibility and efficiency of construction are driving strong and sustained growth as the facade of choice in industrialized process applications. From a base of around 120 million slips today, we anticipate compound double-digit growth over a 5-year view. Around 2/3 of slips supplied in the U.K. today are imported from Continental Europe. Ibstock already has a modest presence in the U.K. slips market today. And like all domestic suppliers, we produce slips by cutting full facing bricks by hand in an inefficient and high-cost approach which is much more carbon-intensive than automated industrial manufacturing processes.Clearly, given our asset footprint, operational and commercial capabilities and customer relationships, we see a significant opportunity to grow in this product area in a way which is highly complementary to what we do today. And that's why we're announcing today an investment to build the U.K.'s first fully automated brick slip factory. The factory will be built on the footprint of our Nostell brick site in West Yorkshire, which was closed as part of our restructuring program in the second half of 2020. The site benefits from significant high-quality clay reserves and all necessary industrial infrastructure. We will initiate construction shortly and expect to produce outputs at scale from early 2024.We're scaling the facility to an overall capacity of 60 million slips, but we'll initially commission capacity for GBP 30 million with the ability to add further scale as the market demand grows. The initial capital cost will be around GBP 38 million, and the first phase is expected to deliver incremental EBITDA of at least GBP 10 million once at full capacity from 2025. Factory will be built using an innovative technology, which will deliver a significant reduction in carbon emissions versus alternatives and will produce the U.K.'s first net zero carbon slip.This investment will enable us to take a leadership position in the fast-growing offsite and modular construction markets, which have a strong demand for local, more sustainable and efficient capacity. So to summarize, our business has historically been focused principally on traditional residential construction markets. These markets with their very attractive long-term fundamentals have enabled Ibstock to deliver strong margins and returns through the cycle and will continue to be the core focus of the group. However, if we want to grow our business at rates in excess of these conventional markets, we must seek to diversify into areas of the U.K. construction sector, which are undergoing significant and rapid change.So in a way that is highly complementary to our existing business, will scale our position rapidly through our new growth engine, Ibstock Futures. Our launch project within futures to build the U.K.'s first automated slips factory will enable the group to take a leadership position in the fast-growing MMC and facades market and will be the first in a number of investments we expect to announce over the coming months and years as we execute on our commitment to deliver attractive growth and shareholder returns into the future. With that, Chris and I will be happy to take your questions, and I think there's a protocol for that.
[Operator Instructions] And we will take our first question from George Speak from Exane BNP Paribas.
A couple, if I may. So just on pricing, could you just give a bit of an indication of what sort of brick pricing we should expect in December? And just how we should think about EBITDA margins as we go into 2022? I think it would be helpful just to have a sense of if you're sort of happy with where consensus is right now or if you see any movement from that. Do you want to take that first, and then I'll go to the second question.
Yes. Happy to, George. In terms of pricing, let me just give you a sense of where we'll be in the second half. we've seen cost inflation come through on the clay side, which really in terms of variable cost and freight, we're sort of getting up to double-digit levels, fixed costs a little bit lower than that. So in response to that, we took action to move selling prices forward in a way that would keep unit margins whole. Now that -- the benefit of that within our P&L streams incrementally through such that by Q4, that will be in the top line, but it wasn't in the top line in Q3, but it will essentially bring margins back to where they were.Now as we look into '22 and your question around sort of EBITDA margins, thinking about that, we've clearly seen some further price increases in the indices that drive variable cost in our business that have happened really since we went out with that initial price increase. So therefore, we're looking to do whatever we can to mitigate that. But by the same token, I would expect us to look to move prices forward in response to that cost inflation that we've seen more recently in our business.So when you look at margins for '22, I mean, the way that we talked about them continues to be true, really, the reality is the demand backdrop we expect to remain very robust. We've talked a little bit about capacity. We will bring an extra sort of 5% or so of capacity through during the middle part of next year, which will be accretive to margins. I think the one thing to be mindful of is that some of the supply chain impacts around the availability of freight, labor and such things is likely whilst we believe it to be transitory as likely to extend into the early part of '22. So that is something that all other things being equal, will have the potential to be a modest drag on margins.And we also flagged back in August, the expectation there'd be a little bit of increased R&D costs as we look into next year. And that will really be associated with the activities of the new Ibstock Futures business unit. So I think as we sit here today, I think it's early to talk about next year with degrees of precision. But I think we would say that we're reasonably comfortable with where the market sits for next year as we sit here today.
Brilliant. That's really helpful. And then just my second question was just sort of around all of these various CapEx projects going on, could you just give us a reminder of what the incremental EBITDA will look like as those fully ramped up? So I think you mentioned GBP 10 million EBITDA and GBP 25 million for the new West Yorkshire project. But just with Atlas and some of the demothballing that's going on post-COVID, could you just give a round up of what the total impact might look like?
Yes. So let me just step me through the kind of drivers of growth as we look forward. So -- and just to sort of move forward from '22, as I alluded to, we'll be commissioning some further capacity in the clay business that will come on stream in the middle of '22, which will give us something in the region of 5% of additional volume from that point forward. So there will be some volume growth in the sort of low to mid-single-digit percentages in play. And because that capacity will be relatively lower fixed costs than the capacity that it replaces, it will be modestly accretive to margins as we come through the back half of '22. If you take the kind of step change growth investments that we talked about, you alluded to them both, Atlas, a GBP 60 million investment to redevelop the wire cut factory in the West Midlands. We talked about EBITDA of at least GBP 12 million on that, which will be fully in the P&L in '25, some of which will be streaming into the P&L in '24.And then the slipped investment in Nostell West Yorkshire, the investment we've announced today. The first phase of that will have a capital cost of GBP 38 million. And just to give you a sense of timing on that, what we expect that around half of that will be invested next year, the majority of the remainder in '23, and then a little bit extending out into '24. And what we said is the incremental EBITDA would be around GBP 10 million. So the Nostell factory was closed in 2020. So there is no EBITDA contribution from that factory today. So that at least GBP 10 million from slips will be incremental. It will be in full in '25. And again, we'd expect perhaps half of that to be in the P&L in '24. So that's the way to think about growth forward from here, George.
And we will now take our next question from Rajesh Patki with JPMorgan.
I've got 2, please. First one, if you could help us with the volumes for the clay and concrete divisions during Q3, where they stand compared to 2019 levels. I think that the first half, you mentioned the sales were at 92% in line, respectively, versus 2019 on a like-for-like basis, if you could help us with where they are at Q3, that would be great thing. And secondly, for the new investment, you have laid out the expected EBITDA of GBP 10 million in relation to the first phase of the CapEx of GBP 38 million. How do you see the EBITDA contribution from the remainder of the investment that you planned, the incremental GBP 12 million? And if you could help us with time line on how long it would take for that expansion if you see continued demand in that segment?
Thanks, Rajesh. Yes, Chris, here. I'll take the first one. I'll let Joe take the second one. So I mean, our volume experience in Q3 was really very similar to where we saw the first half. We said at the half year, we've been running at very high levels of capacity utilization in the network that was scaled at that time. And that's continued to be the case. If you look at it relative to 2019, it was therefore continuing to run in the sort of very low 90%, that sort of order of magnitude.Concrete, the manufacturing volumes modestly behind 2019. So were substantially all the way back there. You'll see in the top line in half 1, we had the benefit of some purchase products that flowed through. And there was a little bit more inflation in the top line in concrete that we saw in half 1. And again, we've seen the same in Q3. So from a top line perspective, the trends in Q3 were very much aligned to what the business saw in half 1.
Yes. Rajesh, on the sort of the second phase of this investment. Clearly, what we're doing to begin with and the majority of the CapEx puts in most of the infrastructure, dryers, kiln technology. And the second phase is more limited in terms of just connecting the remaining capacity and bringing more of the labor in to run the factory. So we estimate GBP 18 million to GBP 20 million for this full EBITDA, the second tranche of investment of around GBP 12 million is much more accretive, obviously, because most of the infrastructure is already done, roughed in the first phase.
And we will take our next question from Glynis Johnson with Jefferies.
I have 3, if I may, and all on brick slips, actually. Can I just clarify, just when you talk about that first phase of the new facility, in terms of the spread of profits. I'm just wondering, the making return on capital employed in line with group. Does that refer to just that first phase? And if you do the second phase, actually does it move it higher given the lower CapEx required for that second phase?The second question just is in terms of what are the products, the brick slip is the one that's quite easy to see. But when you're talking about other facade products, what actually are we talking about in terms of utilizing your clay background? And then just lastly, in terms of what kind of other investments in terms of organic and M&A, what is the end product in terms of how Ibstock looks, in terms of this Ibstock Futures, can we see this become with substantial investments, a very meaningful part of your business?
I'll let Chris take the first bit, and I'll do the second 2.
Glynis, you're absolutely right. I mean the return on capital statement that we make in the release related to the first phase. So it talks about an EBITDA number of GBP 10 million on that invested capital of GBP 38 million. So if you think about an operating profit number from that EBITDA, it would get you to around the sort of 20% return on capital. And as you rightly say, the return on that second phase, which is, as Joe described, relatively capital light, but equally attractive from a sort of returns perspective. it delivers a return on capital that incrementally would be materially above that first phase. So you're thinking about it exactly the right way.
Glynis, and obviously, on the slips themselves, the slip sort of system for sides, you've got a number of different end markets. So the off-site manufacturing for single-family homes, which you've seen quite an increase in the last few years, they need both panelized slips to go into those solutions. So panels. They also -- some of them will need different solutions. So for example, a kit of parts to go on to their adopted products for their elements of their houses.In terms of facades cards, you have precast concrete facades where brick slips are already put on and at various measures, and there's different types of precast concrete facades or glass reinforced lighter weight facades. There's also the mechanical fix or mix slip products. We also have rain screen cladding. You've seen a lot of that recently, especially the recladding in the RMI markets. And then you've got other things which elements that go into buildings, lentils, soffits, for example, our Nexus products and things like that, which design arches and so on.So quite a lot of stuff is being done off-site now and brick slips are very good. There are also obviously internal applications for brick slips to do the insides of buildings with aesthetics that are done quite a lot if you go to a lot of retail outlets and restaurants and so on. So quite a lot, and it's a fast-growing market. In terms of the other investments, we are initially talking about brick slips because that's the anchor investment of futures.But there are a lot of other things that we've got. We've talked about areas where we believe we've got materials to add value to the building materials segment with more sustainable credentials, thinking about clays, expanded clays, calcined clays. We believe that there's a lot of other opportunities and partnerships in construction technology, energy, waste from energy. So this future business is going to be focused on that and moving rapidly. And we believe that it will be a material part of Ibstock. We'll talk more about that in March when we do our full year announcement, and we'll have the new CEO there to do that for this business unit. But we do believe that over time, it's going to be a material part of the IBO Group.
And we will now take our next question from Christen Hjorth with Numis.
I've got 3 questions, if that's okay. The first 1 is on pricing. And as you highlighted at the interim results, there's potentially a move to more flexible pricing and we saw that in the second half of this year to account for the higher cost inflation. I was just going to ask, I mean, historically, the brick industry as that's a once a year price increase, but that price has stuck and being maintained. When you sort of go to more flexible pricing, is there a risk to see maybe sort of pricing move up and down depending on what happens with energy, and I'm talking specifically with the gas price spike that we've had more recently.The second one and related on higher energy costs. I was just wondering if that was having sort of any implications on the viability of imports coming in and freight, et cetera, as well. And then just a final one on Ibstock Futures. You mentioned potential acquisitions there. I was just running one of your answers the acquisition metrics and the risk focus that you would consider there? I imagine there are some businesses in that space, which perhaps loss-making, but there's a big opportunity. Would you look at loss-making businesses in that space? Or is it very much looking for businesses that are already profitable oil make good margins, et cetera.
Yes. So I'll take the first 2, and Chris will take the last one. Yes. So I think pricing, traditionally, everyone wants to try and manage in a sensible way and plan, plan volumes, plan prices, plan budgets, but these are not normal times. And you've seen the absolute need for a much more dynamic approach to pricing. And I think that's what we've had to do. So we took an initiative and we went a little bit earlier. And so we've announced some price increases that are coming through at the beginning of November.We announced those back in August. And we will have to continue to look at that and be more dynamic because the way cost inflation is moving, we need to make sure we're passing that through. But the marketplace itself is experiencing much more dynamic pricing across all product groups, not just bricks. And I think as long as you're working with customers to explain the rationale and the fact that you've not just got cost, but you also -- you need to continue to have a well-invested business then that's what we have to do and the supply and demand dynamics also help us in those conversations.So I think that's that. I think energy cost and imports, I think everyone is -- world over is suffering from energy inflation. I don't think it's that particular is having a marked effect on imports, imports or filling the gap at the moment because U.K. stocks are very low and imports are probably going to get back to 2019 levels towards the end of this year on a run rate or early in Q1 2022. So I don't see them. But there's not -- obviously, there's not a huge elasticity of imports that can come in. So otherwise, it have to come from further afield, and that becomes both costly from a freight point of view and from a people are conscious of carbon and Scope 3 emissions.
And Christen, just in terms of your third 1 around futures and the sort of growth, the inorganic growth pipeline, how we think about that. I mean, Joe talked about the need for different skills and capabilities in futures and talked about fostering a different culture of agility and innovation. And I think as we think about the manner in which that growth is going to come, you can't think of M&A in the conventional sense that we perhaps thought about it in the core business historically. It is necessarily -- we will take a very disciplined approach when we think about deploying capital. But I think we recognize that the risk and reward relationship in this area is going to be different to the way that we've invested in the past.So we will look at these things with the right risk lens, make sure that we're factoring in that risk premium in the way that we think about deploying capital in an incremental sense. And our investment criteria remain as they ever were. In inorganic acquisitions, we need to see from day 1, a return which is materially above the group's cost of capital. And we need to see synergistic opportunities to take that return forward over time. So I think we certainly retain the level of discipline that we've always had around acquisitions. But I think we need to take a slightly more flexible approach to the way we think about partnerships, alliances and different forms of combination relative to what we've done in the past.
We'll now take the next question from Gregor Kuglitsch with UBS.
I can just come back to the brick slip and sort of the economics because kind of doing the crude math here, first tranche is maybe 20% return on those kind of numbers and like all in like north of 30%. So I guess the question is why the economics of that market is so attractive? And is there sort of a risk that because they're so attractive, others just better replicate that and basically get those returns back sort of something lower, I guess?And then the second question is sort of touching on the point before. Can you just -- can you give us a sense for your risk appetite here? So this investment you're announcing today sort of sounds reasonably low risk because it's sort of a product that you know well and an existing site and all the rest of it so perhaps not too risky for shareholders. Some of the other stuff kind of sounds a little bit more risky. But can you just give us a sense how you think about that and to make sure that shareholders don't get exposed? I appreciate the opportunity, obviously. But equally, there's a risk that it doesn't go according to plan. So I just want to sort of gauge your appetite in that regard.
Yes. Thanks, Gregor. So obviously, profitability wise, these -- when you're using less material, less energy, you get better margins and great return on capital. But I think the key thing with slips is that there's quite a lot of design in those slips. So you've got -- they have to be -- there's a lot of estimation, design and going into a solution as opposed to just a commodity. So the value add of the slip into the different applications commands a higher price. And I don't think -- I mean the barriers to entry are similar in the sense that there's no play reserves, heavy capital-intensive investments. And indeed, even things like extruded and pressed, the products and the quality that you can get, that's going to -- we've been working on that for some time now. That's why we have really announced it now. So it is a bit of a -- I don't think it's going to be -- attract huge competition in the short term. But I do think the market is there to grow significantly, and we would expect more players at some stage.In terms of risk, we're not -- Ibstock Futures is not -- there could be more conventional acquisitions because there are some significant players with synergies in the market in the area that we're talking about. But we're not -- on some of the more flexible points that Chris mentioned earlier on and a bit more agility, we're not talking about big numbers here. So I think risks to shareholders are very low. Shareholders want us to grow. With growth, you have to have some risk. But I think we always take a disciplined approach and we really look at -- we've got lots of existing partnerships that we've been developing over time that we know about. So I don't think the risks are going to be great.We're not just going to go and invest in start-ups that have got no track record and pie in the sky. But there may be some early-stage investments in some early stage where we've already seen some very attractive opportunities for where they're coming. So yes, I mean, that's what it is. Ibstock Futures is going to be a bit more agile, a bit more risk, but I don't think we're talking about big quantums there on the risk profile.
Okay. And then just to be clear on the slips, obviously, your -- the factory will actually produce the slips and there's obviously you laid out, I think, 5 or 6 applications. Is your plan to make all of those applications yourself? Or is your plan to do a little bit of that and sell some of that, just slip brick on to, I guess, there's already 120 million of this stuff being manufactured by third parties. So just maybe clarity how much downstream you actually want to go here?
It will be a combination. We already have partnerships, for example, with MechSlip. We have a partner with The Metal. So -- and we've got options for panels. So it will be a combination. Some brick slips will be sold as a kit of parts. In certain applications, for example, the value add is going to be just in time because when you're running a factory as opposed to a job site housebuilding and you're building factories offsite, just-in-time solutions are much more important. So it's not just about -- it's about the whole solution, the supply chain, not just the product itself, but we will be -- in terms of those products and solutions, we'll be looking at panels and the whole gambit.
And we will now take our next question from Florence O'Donoghue with Davy Research.
Just a couple from me, if I can. Just the first one is to go back to brick slip. And when you talk about the kind of double-digit annual growth potential for the product area. Is there any particular category would you be particularly excited about, be it res, nonres, on or off-site? And just on bricks as well, just wondering if the selling channel or the sales channel is any different to what you use currently? Second question then is just, I guess, a bit more prosaic, just return to energy costs. Just wondering in relation to the that wouldn't be hedged for next year. What kind of, I guess, pricing recovery requirement is there based on where energy prices are at the moment, just to get a sense of what the risk is or the exposure is to the unhedged part as things are today?
Thanks, John. So I'll take the first, Chris will take the second. I think we see both facades, rain screen cladding and the off-site, I've mentioned, a very, very attractive in terms of their growth. Obviously, modern methods of construction to build single-family homes off-site is still emerging. So as that emerges, that will probably take more time to ramp up and the solutions will evolve as they go. So you've heard of Elke Homes, Legal & General, WElink, Barclays, Modular, lots of these companies are developing their solutions, and we're in strong conversations with them now to see how we can evolve together. So I'd say that is definitely emerging. But probably right now, right here, fast-growing areas of facade, rain screen flooding, we can't keep up in our mix lip product. If you think about all the clouds that have to be done and the need to move at a mid high-rise buildings at pace in job sites. So this is where we think there's a much faster initial, but we do believe that the whole offsite market will be attractive.In terms of routes to market, we some -- of those things that I've mentioned are a little bit different and new, but we've got quite a lot of partnerships already developed as we've been developing this market study. But we already sell into that sector because our existing modular business. So most of those routes to market are well known to us, some are emerging.
Let me take the one on energy cost floor. So in terms of that 20%, when you look at the price it forward into next year, I mean, clearly, Jan, Feb, March still up at sort of north of GBP 1.50 per firm. So very elevated relative to a sort of historic average price of perhaps 50p a firm that has existed over recent years. So if you apply that to the owned portion, you can see that even though you're only talking about adding in 20% of further cover, you are talking about a significant double-digit increase year-on-year in terms of the total cost of energy. So that's what we are facing into. Our strategy we think insulates us against the vast majority of that energy price increase, and we feel good about the cover that we have. We've got a bit of cover into '23 and '24 as well. So we take a derisked sort of view of that but it will require further price increases in order to recover that because the reality is that we've seen levels of inflation over and above that, which was present in the market in sort of August, September time. So that's the way to think about year-on-year.
And we will take the next question from John Bell with Deutsche Bank.
Joe, Chris. Good news. I've got 1 question. The bad news, it's got 3 parts to it, I'm afraid. So there's some evidence of house builders using more concrete bricks. Recently, probably simply because there's more of it available. Is this a long-term threat? Should you be more involved in this as a hedge? And how do the carbon emissions compare? Just interested in your kind of high-level thoughts there, please.
Yes. Thanks, John. So there's been a place for concrete bricks for some time now. We actually produce concrete walling stone reconstituted walling stone. So we're not against concrete at all. It has different connotations. I think we've got our own growth areas, and we believe that clay has a lot of advantages in terms of aesthetic durability over time. And the work that we're doing on carbon and the whole life carbon intensity of a brick when you think about how long it lasts compared to concrete, we believe that there's a competitive advantage there. But we think there's a place for concrete bricks in certain applications. I think they call them concrete blocks, not concrete bricks.So that's fine. And your other question was carbon intensity. I think when you -- I mentioned that. So the whole life carbon costs, carbon intensity of a brick when you factor it in with concrete is favorable. And when you look at EPDs that are disclosed at the moment, not all of the cement content is put in the carbon calculations for concrete. So we're focused on our business, and we believe that we're going to be making announcements the end of this year about our own net zero targets. We've done a huge amount to reduce carbon. And when you look at the whole life cycle, we believe that we've got an advantage.
And we will now take our next question from Clyde Lewis with Peel Hunt.
A couple of questions, if I may. One around, I suppose, net debt and I suppose sort of CapEx levels as we look forward now. Just sort of if you can update a little bit on your thoughts and I suppose sort of CapEx wise, are we going to be looking at a figure of sort of north of GBP 70 million for '22? And how does that drop again? You may come up with more projects between now and then, but how is that likely to drop into '23? And the second 1 I had really was around sort of freight. I'm just wondering where market conditions are around sort of haulage and freight issues and have those costs sort of settled down yet?
Thanks, Clyde. I'll take the first one. Joe, take the second. In terms of I mean the numbers, just to give you them again for '22, Atlas will be around 30 million slips. We talked about half of the 38 million, so call that sort of 19 million to 20 million going out next year. So across those 2 significant growth investments, you've got around GBP 50 million. The sustaining load, which historically we talked about being in that sort of 20% to 25%. We expect to be a little bit lower, modestly below 20% perhaps. So I think we told you, therefore, getting to around GBP 70 million for CapEx into next year, absent any other activities that we come back and talk about. So that's the way to think about it.As you think about '23, that does come off. So the growth investments of Atlas and slips will come down to around GBP 30 million which is roughly sort of 50-50 across the 2 and a similar sustaining load. So you can see that the CapEx load will lessen on those activities through into '23 and then very modest amounts in '24.
Yes. Freight, I mean is it still a challenge, but I think we're working around it with our customers and our freight suppliers. We certainly we've had some disruption in the last -- probably since August, quite heightened disruption. But we're coping with it. I think yes. The main thing is that we've probably increased the self-collections because people -- the demand is still very high, so people really want their bricks. So there's been more self-collection. We have a delivered freight model with our 3PL suppliers. So there's been an increase in self-collection to try and make sure job sites are supplied properly. There's quite a lot of work going on to work on loosening the top to improve the number of drivers. It's not assets, it's drivers. And I'm on a panel with the cabinet office looking at all of that with Dave Lewis chairing it and they're doing a lot of work behind the scenes to try and accelerate everything from training drivers, licenses, all the rest of it and bringing some more drivers in. So it's been worked on. It hasn't got materially better in the short term, but I think there will be a few plans to improve things going forward.
Understand could I have -- sorry, just going back, I suppose, to sort of Ibstock Futures. And I suppose, I mean, Glynis touched on it a little bit earlier, but just around, I suppose, the sort of material that you might be looking to develop. Are you very much going to stick to sort of the heavier products in the lay the concrete or would sort of plastics timber sort of feature at all in your thoughts going forward?
Yes. I mean we already do plastics. We've got injection molding machines that go with solutions for our roofing business because we do whole roof solutions. We'll be open to all sorts of things, Clyde. I think the short-term sort of things that we're talking about, obviously, obviously, the solutions associated with that -- And then on some of those material areas that we talked a bit about, that can go into some mendacious materials, supplementally some mendacious materials, bags cement and so on with our car sign plays, that sort of technology. But we're open and we've got a few ideas as well. So watch this space. We will say a lot more about this with the new head of the division when he is here, and that will be in March at our results announcement.
And we have no further questions at this time. I will turn the call back to Joe Hudson for any closing remarks.
Yes. Thanks very much for your time today. We're excited about this. It's good that our business is performing. The strategy is working in terms of the core operational business, and we're managing some of the headwinds. So we are expecting a strong year this year despite all the challenges, but the demand remains very good. and forward into next year. And we're very excited about this future organization with a strong anchor project. So we'll talk much more about it in March. But until that said, thanks very much for your time today.
This concludes today's call.