Australian building materials maker Rinker Group Ltd. said its quarterly profit rose 14 percent after it raised prices, but its shares fell nearly 4 percent after it forecast lower earnings than analysts had expected.
"The market was probably optimistic that there would be some scope to improve guidance," said Frank Villante, Chief Investment Officer at Souls Funds Management.
"People will say it was as good as it gets. They have had really good times for quite a few years," he said.
Rinker’s guidance for earnings per share of 84 to 90 U.S. cents - which excludes one-off gains and the impact of a capital return and share buyback - compared with an average forecast from eight analysts for earnings per share of around 94 U.S. cents for 2007.
"The forecast does assume that things are going to slow a bit going forward, and also that price increases aren’t going to be as robust as they were," Rinker Chief Executive David Clarke told analysts and journalists by telephone.
"But we’re pretty confident - of this year’s forecast anyway," he added.
Rinker, which is focused on the fast-growing U.S. states of Florida, Arizona and Nevada, vies with companies like Vulcan Materials Corp. and Florida Rock Industries Inc. .
"We are seeing a slowdown in housing in some areas, where house prices have increased dramatically due to heavy demand and supply constraints," Clarke said. That "may have a significant impact in these areas," he said.
Still, Clarke said Rinker’s volumes would be unchanged this year as a fall in residential construction was offset by non-residential projects such as an $85 million Sea World 2007 resort in Orlando, Florida.
In the three months to June, Rinker’s net profit was $206m, up from $181m a year earlier. Earnings per share of 22.7 U.S. cents, up 17 percent, were modestly better than two of three analyst forecasts surveyed by Reuters.
Sales rose 18 percent to $1.46 billion for the quarter.
Chairman John Morschel said Rinker was evaluating possible acquisitions in North America.
"The climate for acquisitions may be improving with the current weakness in the stock market," Morschel said. "Our financial capacity is strong and we are well-positioned to capitalise on any value-adding opportunities as they arise."
Earnings before interest and tax (EBIT) rose 14 percent to $324 million. Profit margins rose in all major business segments except the Australian operations and U.S. cement. Volumes were up in U.S. business segments except concrete pipe.