Rugby results fail to impress

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The Independent Online

Deputy City Editor

Rugby, the cement and building materials group, failed to impress the market with a 19 per cent improvement in pre-tax profits last year.

Despite falling by more than a third over the last year, under-performing the rest of the market by 28 per cent, the shares closed 1p lower at 107p.

As expected, Rugby confirmed that it had been fined £3.9m by the European Commission for alleged price-rigging in its cement operation. In December a total of 33 companies were fined 4 per cent of turnover as a result of an investigation into wildly varying prices throughout Europe.

Despite the charge, profits for the 12 months to December rose from £63.8m to £76.1m, struck from a 34 per cent increase in sales which broke through the £1bn mark for the first time, increasing from £755m to £1.01bn.

Joinery, the group's biggest division, shrugged off severe competition at home from volume-sensitive companies, such as Spring Ram, while profits in the US jumped after improvements in the American housing market. Cement slipped in the UK but showed good growth in the Australian market.

After an 11 per cent increase in earnings per share to 8.1p (7.3p), the dividend rose 6 per cent to 3.6p.

The fall in Rugby's share price has mirrored the under-performance of the building materials sector as the market has focused on rising interest rates, a stagnant housing market and over-capacity.

But analysts said that with growth prospects for Rugby's main divisions remaining uninspiring the shares on only a small discount to rivals RMC and CRH were unlikely to bounce.

The EU's attack on the cement industry followed similar moves on perceived cartels in steel and cardboard. It has been suspected for years that prices for cement, which because of the high cost of transport has always been produced by local monopoly suppliers, are fixed to the detriment of consumers.