Readymix posts loss of €9.6m due to sustained weakness in construction

BUILDING MATERIALS group Readymix posted a pretax loss of €9.6 million for the first six months of the year as the challenging trading conditions experienced in the latter half of 2007 continued into 2008.

It said demand for the company's products had reduced sharply, driven by the sustained weakness in the housing and commercial construction sectors.

Total revenues from continuing operations are down 9.4 per cent compared with the same period last year.

Concrete and aggregates revenues have declined by 5.5 per cent due to market conditions.

Pre-cast concrete products revenue has declined by 25.7 per cent as a result of the reduced number of housing starts.

Lower revenues combined with the higher cost of raw materials, distribution, fuel and energy, resulted in an operating loss before non-recurring items of €6.6million for the first half of the year.

In addition, the group registered a once-off loss of €3.1 million resulting from rationalisation costs and the disposal of plant and machinery. The company said it has cut staff by 15 per cent and rationalised 12 per cent of its operating sites.

Readymix said it expects very difficult trading conditions for the remainder of 2008 and well into 2009.

"Revenues will continue to decline as a result of the continued slowdown in the housing sector, the weakness of the commercial developments and the slow start of new infrastructure projects," it said in a statement.

"At the same time, cost increases across all lines will continue to pressure margins. Against this background, the priorities for management are continued cost reduction and focusing our investment programme on projects to deliver efficiency savings."

Davy analyst Robert Gardiner said the results were broadly in line with its estimates.

"The results from Readymix are not surprising given the continued deterioration of the Irish housing market. We estimate that housing accounts for 60 per cent of Readymix sales in Ireland. However, with net assets per share of 150 cent and net cash of €14 million at end-June, we see value in the company."

Despite the weak earnings outlook, Goodbody analyst Matthew Cotter said he believed the company still offered good value over the longer term at the current share price of 69 cent, which is around a 56 per cent discount to its estimated full year 2008 tangible net asset value of 158 cent.

"Furthermore, we believe that this may represent an opportune time for Cemex to take out the minority shareholdings, which are currently valued at less than €30 million," he said.