Slowdown in Irish economy takes toll on profit margins at Readymix

Moderating Irish economic growth and the slowdown in the US economy combined to reduce profit growth at Readymix for the six months to the end of June.

Reporting a 7.3 per cent rise in pre-tax profits to €13.7 million, the concrete products company was cautious on current trading. First half trading patterns "are likely to be repeated with some further moderation of growth possible", according to the group.

Despite slowing construction activity, most stockbroking analysts expect Readymix's full year earnings per share to be up about 10 per cent to about 22 cents. The impact of lower construction activity is expected to be offset by infrastructural spending under the National Development Plan. Product price increases, already in the pipeline, and lower energy costs will improve margins.

Readymix managing director, Mr John McNerney, said that growth of 1 to 2 per cent in Irish construction activity this year was now more likely than the earlier expectation of 5 to 6 per cent growth. With significant moderation of growth in the Irish market and a static market in Northern Ireland the very strong growth seen in recent years has moved to more modest levels, he said.

First half turnover at Readymix fell by 3.6 per cent to €112.5 million. The fall in turnover reflected the drop in residential construction and the slowdown in the US economy, which had an impact on some large industrial projects in Ireland. Readymix had the contract to supply concrete to the new Intel facility at Leixlip which was put on hold in April.

The company said there was also evidence of a slowing in commercial developments outside prime locations.

Mr McNerney said spending under the National Development Plan more than offset the negatives seen in the other sectors. Commenting on the residential construction market, Mr McNerney said there was evidence of a mismatch between the significant demand from first-time buyers and their ability to buy houses.

However, he said there are now some tentative signs of property prices coming back. He added there was also evidence of "some heat" coming out of the cost of skilled construction workers through the replacement of standard working practices with more modern ones. He said he expected some pick-up in first-time house building next year.

In Northern Ireland, activity remained steady in a market Mr McNerney described as "competitive".

The Isle of Man business's performance was described as "satisfactory" while the pre-cast flooring plant in Somerset in the UK was profitable.