Bottom Line: RMC finds the right mix in Germany

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The Independent Online
YESTERDAY's 16p rise in RMC's share price to 966p reflected figures at the top of expectations for the world's leading supplier of ready-mixed concrete.

A successful move into eastern Germany and recovery at home made up for weak performances from the rest of the Continent.

A rise of 7 per cent in pre-tax profits to pounds 177.8m marked the turning point in a four-year decline from the 1989 peak of pounds 248m. The figure would have been pounds 8.6m higher but for the strengthening of the pound against the mark.

Earnings per share, which enjoyed a 26 per cent surge to 39.4p thanks to the impact of German tax concessions, will continue to benefit from a reduced tax charge for years to come. Meanwhile, a 5 per cent jump in the dividend to 21p, after last year's maintained payout, confirmed the return of confidence.

The figures provide important evidence that a pounds 500m investment programme in eastern Germany is starting to pay off. Profits of pounds 21m were better than forecast and put RMC in a strong position to generate a budgeted 25 per cent return on capital.

There is price competition from Polish imports but full capacity utilisation and rapidly growing volumes mean that decent profits can be made despite tight margins. Overall, Germany increased profits from pounds 120m to pounds 141m.

Britain provided the other bright spot. A jump in profits from pounds 10.5m to pounds 34m included strong growth from DIY retailing, builders' merchants and waste disposal, plus a doubling in the return - albeit from a low base - from the core concrete and aggregates businesses where prices for ready- mixed rose 9 per cent last year.

Forecast profits of pounds 225m this year and pounds 260m in 1995 put the shares on a prospective p/e of 18 falling to 15. That is about the average for the sector - which is mean given RMC's proven resilience and its strong positions in recovering markets.

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