Readymix shares down 5% at close

SHARES in concrete maker Readymix plummeted by more than 15% yesterday before staging a recovery to end 5% down on the day.

Readymix took a beating after the company announced on Friday, after close of business, in a blunt statement: “The profits of Readymix plc will be substantially below market expectations for 2004.”

Obviously the company hoped that, with the weekend to digest the news, the markets would not savage the company.

Shortly after opening at €1.85 the shares were down 7% to €1.72 by 8.30am, fell 30c to €1.55, down 16.22% by 11.30am. The shares rallied in the afternoon and came back to be down just 5% at close of business. The shares hit €1.70, down 15 cent on the day.

Yesterday, Goodbody Stockbrokers analyst Robert Eason, who re-rated the shares from reduce to sell, said based purely on fundamentals it is difficult to justify yesterday’s opening price which “suggests a price substantially below the current price of 185c.”

Mr Eason noted that the erosion of margin has continued in the third quarter and has accelerated in the final quarter. “This reflects rising costs, raw materials and fuel, and increased price competition, which are offsetting the impact of higher volumes. Indeed, the Irish wholesale price index for October shows concrete prices have shown month-on-month declines in nine of the last 12 months.

“At first glance and subject to talking to management, we estimate that FY04 PBT forecasts will be revised down from €17.7m to a range of €12-€13m (-30%), which implies earnings of 9-10c (versus 16.8c in FY03). We are assuming earnings to be broadly flat in 2005, reflecting slower forecast construction growth in 2005 and the competitive pricing environment,” he added.

Mr Eason observed that among the supports for the share price is strong dividend payout which gives a yield of c.4%.