Rugby cuts jobs after profits warning

RUGBY GROUP, the UK building materials supplier, yesterday said it was cutting 400 jobs at its Doncaster and Gloucester plants and warned that poor trading conditions and competition from cheap imports were eroding profits.

Although the company had indicated a slowdown in demand earlier in the year, the news took the City by surprise, with the share price tumbling by as much as 15 per cent during the day, before closing 8 per cent down at 82p.

Rugby, which employs 3,300 people, commenced formal talks with unions yesterday, and said it hoped to have completed the redundancies by the new year.

The company added that "the decline in the UK market that began to emerge in the second quarter of the year has continued into the second half. As a result, UK joinery profitability has not shown the improvement expected".

Rugby, whose primary activity is the manufacturing of wooden building products, has been affected by the general slowdown in the UK housing sector. There has also been a shift in demand, with consumers moving away from traditional wooden windows and doors, towards PVC products.

The strength of sterling has given a boost to imports, with Rugby losing significant market share to cheaper Latin American producers.

The company also said that the cessation of its contract with the Jewson/Harcros retailing chain had hit profits. It is believed that Rugby decided not to renew the pounds 40m contract due to price demands, which would have resulted in Rugby losing money on the deal.

Plans to make good this loss in revenue had not been as successful as expected, according to the statement.

Analysts have slashed profit forecasts by pounds 10m to pounds 73m, and believe that the redundancies will cost the company pounds 5m.