RMC Group braced for sharp drop in UK profits

RMC Group braced for sharp drop in UK profits
Published: 31 August 2004

Investors are bracing themselves for a sharp drop in profits from RMC Group PLC’s UK operations in the first half of 2004 when the company reports Thursday as lower roads spending by the UK’s Highways Agency and problems at its Rugby cement plant will have severely dented first half profitability.

In a recent trading update, the group said that lower spending on asphalt products -- where consumption has fallen 10 pct -- and reduced demand for sand and gravel and hard rock products would leave UK profits for the six months to June 2004 only "slightly more" than half the 41.0 mln stg reported at the same time last year. At Rugby, cement production has been hampered by a number of one-off stoppages after a switch in the supply of raw materials.

Despite the setback in the UK, the company expects group profits for the six months to June to be "significantly ahead" of the UK£50.7m reported last time helped by good performances from North America and France. The group is also benefiting from its cost reduction programme, while a further reduction in group debt -- now about UK£1bn -- will help cut the overall interest charge.

Apart from the trading uncertainties facing the UK market, investors will also be focusing on Germany where a fresh overhaul of the business is underway.  For the first half of 2004, the group expects German losses to be down on the 31.4 mln stg reported at the half-way stage last year and expectations are for a return to break-even by 2005.