Weak housing market hurts Blue Circle

NIGEL COPE

The weak housing market that has forced the UK construction industry into retrenchment has taken its toll on Blue Circle Industries, the cement group that also owns Potterton boilers and Armitage Shanks bathrooms.

Group pre-tax profits in the six months to June rose 18 per cent to pounds 101.4m on sales static at pounds 840m. But the shares fell 12p to 322p after problems at the heating division and a cautious outlook in the cement market.

Heating profits slumped to pounds 100,000 compared with pounds 12.8m last year as the housing market ground to a halt. The company said it was reliant on secondary housing transactions which had been weak, causing poor demand for boiler replacement.

In the UK, Potterton Myson saw profits slump from pounds 9.2m to pounds 3.4m, hit by pounds 1.5m of redundancy costs. Profits at the French heating division also fell sharply and the German division made a pounds 5m loss.

James Loudon, finance dir- ector, said: "The UK figures reflect a lack of consumer confidence. Prices have also been weak. We tried to push a price rise through earlier this year but it did not stick."

There were signs that the outlook for prices was improving and that the radiator business had been less affected.

Difficulties in the heating division led to the resignation last month of the division's chief executive Charles Young, who left by "mutual agreement".

In February, the division was re-organised, resulting in the hiving off of the bathrooms division. It reported a 20 per cent rise in profits to pounds 14m, though this was achieved more by cost-cutting than improved demand.

In the heavy building materials division, which accounts for the bulk of group income, operating profits improved by a third to pounds 102m.

However, the outlook in the UK market was weak due to the low level of housing starts and uncertainty over public expenditure on infrastructure projects.

The cement divisions in the United States, Far East and Chile are performing better. Blue Circle sold its landfill division for pounds 70m, which will result in a pounds 55m exceptional profit in the second half.

Mr Loudon said there was unlikely to be a significant improvement in the second half unless the housing market picked up.

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