Readymix issues second profit warning

Profits at building materials group Readymix are set to fall well below market expectations, the company warned last night.

In its second such warning this year, Readymix said that, as a result of increasing cost pressures and poor demand in some markets, profits for this year would be "substantially below" market expectations.

"An erosion in margins in the third quarter of the year has accelerated in the fourth quarter, reducing profitability in the Republic of Ireland and Northern Ireland," the group's statement said.

"This has arisen principally through a combination of intense competition and increased raw material costs. The recent increase in the cost of fuel has further impacted on our transport and production costs.

"Considerable additional re-organisation and one-off costs have also been incurred. Softer demand this year has also reduced activity and profitability on the Isle of Man," Readymix warned.

Its statement said that overall strong demand and increased volumes had not been enough to offset the sharper decline in margins.

The group issued the warning to the market after close of business last night. Its share price remained unchanged at €1.85.

Around half of Readymix's turnover comes from the sale of ready-mixed concrete to the State's booming building industry. However, increased competition and higher costs have been eating into the company's margins since the beginning of this year. It issued its first profit warning in May.

The group subsequently produced interim results showing that profits for the first half of the year had dropped 19 per cent on the same period in 2003.

The figures showed that, while turnover grew 6 per cent to €122.6 million, operating profits fell to €10.4 million from €12.8 million.

The company blamed tougher competition and higher costs for the fall in profitability. Its managing director, Mr Joe Doyle, said at the time that it had come under pressure from a combination of new market entrants and an overall increase in capacity.

He confirmed that Readymix was re-organising itself in a bid to halt the decline in its earnings, and added that it hoped to see a "slightly better" second half.

Recently, global giant Cemex took over Readymix's biggest shareholder, RMC, which has a 63 per cent stake in the Irish firm.