Building costs will soar, says Rugby

RUGBY GROUP, Britain's third-largest cement producer, yesterday warned of a steep rise in building costs as materials producers impose price rises on contractors.

Peter Carr, Rugby's managing director, pointed to prices for steel, glass, timber and plasterboard, where rises ranging from 7 per cent to 15 per cent appear to be sticking. This is partly due to devaluation, which has pushed up timber prices and encouraged suppliers such as Pilkington, whose main competitors are importers, to increase prices.

Rugby uses steel, glass and timber in its businesses, and it is passing the increases on. However, in its core cement business, which is almost exclusively domestic, prices were flat this year and the group will 'think hard' before it decides whether to impose an increase in the current year.

Mr Carr said this was because the cement market had not suffered the price wars experienced in other materials, and because only a quarter of production goes into housing, which is showing signs of recovery.

Rugby's British cement profits fell 12 per cent to pounds 16.8m last year, but recovery in Australia and the US meant profits held at pounds 57.6m. Sales rose 22 per cent to pounds 650m.

Cash balances halved to pounds 12m, partly because of a pounds 15m adverse exchange movement and a pounds 10m rise in capital spending to pounds 23m.

Earnings per share were static at 13.1p and the dividend was held at 6.45p, via a 3.6p final. The shares gained 14p to 236p.