Can Cemex deal boost Readymix further?

Can Cemex deal boost Readymix further?
07 September 2006

Over the past couple of years, Readymix has enjoyed a roller-coaster ride in its share price and financial performance, reports Independent Newspapers Ireland. Back in July 2004, it had been one of the poorer performers on the market, based on the number of sell recommendations issued on the stock by analysts.

But by early 2005, despite two profit warnings in the previous year, the Readymix share price had climbed to 12-month highs. This was fuelled primarily by speculation that new majority shareholder Cemex was about to offload it.

Last November, Readymix shares had reached a five-year high of €2.55, but fell back again during the early part of 2006.

Since then, they have climbed steadily back to the low €2.40 range.

The acquisition by Cemex of Readymix’s former majority shareholder has been the catalyst in the company’s recovery. The recent announcement that Readymix has signed a deal with Cemex to adopt its business model and IT platform to enhance operational, administrative and financial performance is being seen as an indication of its long-term commitment to Readymix and Ireland.

For the first six months of this year, Readymix posted a 25pc rise in operating profits, excluding exceptional items, of €10.1m. Those results did not include the €23m it will make from the sale earlier this year of its East Wall Road site.

The latest move by Cemex will add to the speculation that it will buy out the minorities in the company, which could also be underpinning the more recent rise in the share price.

But can the share price go much further? There is a feeling that the market has already anticipated many of the benefits of the changes and that the price will level off in the mid-€2.40 range.

Despite the deal with Cemex, NCB has maintained its hold rating, saying the stock price reflects much of the operating improvements.

It suggests that there is probably a limited upside to how far the share can continue to go.

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