Market Report: Cracks appear in building material sector

BUILDING material shares were hammered yesterday as fears multiplied that they had moved ahead far too strongly in the stock market upsurge.

Prices were pulled back sharply as analysts pondered their recent outperformance. The Barclays de Zoete Wedd decision on Tuesday to lower its profit forecast for the Meyer International timber group heightened the growing anxiety.

The BZW downgrade followed cautious comments on the industry from Carr Kitcat & Aitken and NatWest Securities. Meyer, down 10p on Tuesday, was at one time down another 20p. The shares closed 16p off at 302p. BZW reduced its estimates from pounds 15m to pounds 11m and from pounds 19m to pounds 18m.

Fears that profit estimates of the Pilkington glass group would be cut following meetings due to be held with the company added to the nervousness.

With many building material groups due to report soon, the temptation to snatch profits proved irresistible.

Among those lowered were Blue Circle Industries, Hepworth, RMC Group and Redland. Pilkington cracked 7.5p to 103p.

The demolition did not leave builders unscathed - George Wimpey was down 4p at 129p.

The rest of the market had a slightly more positive time, with the FT-SE 100 index closing 6.8 points higher at 2,956.7, just below its high. A stream of company results - it was one of the busiest sessions for months - helped sentiment with the failure of the dreaded big rights issue to materialise steadying nerves.

Signs that Germany could be edging towards a significant interest rate cut was another helpful influence.

Today will produce another array of company results, and anticipating figures prompted many of the share movements. Rolls-Royce, for example, fell 6p to 129p with worries about today's figures and aero contracts, plus Societe Generale Strauss Turnbull sell advice, prompting the fall.

Asda, the revitalised supermarket chain, rose 2.25p to 72p, highest since the summer of 1991, as the shares celebrated their return to the FT-SE 100 index. They were removed in January last year.

The supermarket group replaced another retailer, W H Smith, up 8p to 430p. Smith's removal came as a surprise. Most observers had expected English China Clays, down 16p to 453p, or Scottish Hydro Electric, up 3p at 261p, to be the casualty.

Among changes in the FT-SE 250 index are the inclusion of Danka Business Systems, Barratt Developments and, briefly if the Airtours bid goes through, Owners Abroad. Hartstone, the subject of a recent bear raid, and Amstrad are two to lose their places.

Brewers had a sober time. Last year's beer output was confirmed as the lowest since 1970 and the Bass brewing group, meeting analysts, suffered more downgradings. UBS Phillips & Drew and Nikko Securities were among those to lower forecasts.

The market is convinced Bass is intent on sacrificing margins in a determined bid to strengthen its leadership of the beer market, where it currently has a 23 per cent slice.

Bass fell 10p to 583p and Whitbread 'A' 7p to 481p.

Standard Chartered had a volatile session. At one time the shares were down 30p on the larger-than-expected provision. But the price quickly started to recover and positive comments at the analysts' meeting left the shares sporting a 25p gain at 716p.

Vickers, as the rights issue duly appeared, rose 6p to 124p.

Hanson fell 2.5p to 254.5p. BZW is cautious on the shares and S G Warburg put out a sell recommendation.

Queens Moat Houses, the heavily borrowed hotel group, had a difficult session, ending 3p lower at 47p. NatWest Securities did the damage. Analyst Mark Finnie drew attention to pounds 104m of off-balance-sheet exposure which could be redefined as a balance sheet liability under accountancy changes. 'It re- emphasises the difficult financial predicament that the company still faces,' he said.

Ladbroke, the betting and hotels group, fell 2p to 208p. Chairman Cyril Stein has sold 50,000 shares at 207p.

Geest, the fresh food group known for its bananas, continued to enjoy takeover speculation. The shares rose 8p to 474p. Talk persists of a US strike.

The Americans could be hard hit if the latest EC import restrictions are finally approved. The theory is that one of the US groups will attempt to protect its position by swallowing Geest at around 550p a share.

Acorn Computer firmed 5p to 124p as Nippon Investments emerged as a backer of the new microchip developed with Apple Computer.

Cupid, the bridal wear group being revamped by Richard Shaw, will lose pounds 1.5m this year but make profits of pounds 1m next, believes stockbroker Wise Speke. A cash raising should produce pounds 1.9m, reducing gearing to 20 per cent. Mr Shaw, development executive at Hartstone, will have a 4 per cent stake. Shareholders vote on the changes on Monday. The shares fell 2p to 51p.

Goodhead, the printing and publishing group where profits are under pressure, held at 21p against the 227p peak hit in 1989. Chairman John Madejski has acquired 150,000 shares at 20p, lifting his stake to 22.2 per cent. Interim profits were down 26.8 per cent at pounds 314,000 and expectations for the year have been pulled back to about pounds 450,000 against last year's pounds 721,000.