Competition hits Readymix as shares fall 50%

PROFITS at mixed concrete maker Readymix fell by almost 50% as intense competition in the company’s core sector intensified in 2004, despite the ongoing building boom.

Rival CRH have also see profits margins in the sector erode but the company plan to increase cement prices by 7% which will put further profit on margin in the mixed concrete sector.

Merrion Stockbrokers analyst John Mattimoe said: “The decline reflects very competitive market conditions in downstream construction materials (concrete) in Ireland, which also impacts the ability of operators to recover higher input costs. We have factored in competitive downstream market conditions into our forecasts for CRH’s Irish operations, which are partly offset by the performance of its upstream businesses,” he said.

Shares in Readymix fell four cents to €2.06 - a 1.9% fall.

Goodbody Stockbrokers analyst Robert Eason rate the shares a sell and commenced his note on the company’s results for the year to the end to December 31 last with the phrase: “A year to forget.”

“Since the year-end the company has undertaken a fundamental review of its entire cost base, which will yield improved cost controls and operating efficiencies. However, this process is not expected to yield positive benefits until the latter part of the year.

The company is also reviewing the ‘productivity of its total asset base’ aimed at unlocking shareholder value in the short to medium term,” he added.

In a statement with the end of year results Readymix said: “We expect a progressive recovery in profitability to flow from these actions, and are confident they will yield positive benefits in the latter part of the year.”

The company said the disappointing financial performance during 2004 can mainly be attributed to the competitive market conditions.

“While there has been a slight improvement in market conditions in the first weeks of the current year, conditions remain challenging,” the company cautioned.