Waste/Shanks hit by poor demand, slow construction

The continuing woes of the construction industry forced the waste disposal group Shanks to issue a profit warning yesterday.

The company admitted it had been hit by a slowdown at its solid waste businesses – which sort and process commercial, construction, household and industrial refuse – in both the UK and the Netherlands.

The division, a major contributor to the group's profits last year, had been "impacted by the northern European recession and record lows in construction output," Shanks said.

Falling demand for recycled materials, a major income source for the company, and increased competition were also blamed by Shanks for its admission that full-year results would be "slightly below the range of current expectation".

Before the profit warning, analysts' underlying pre-tax profit forecasts for the 12 months had ranged from £31m to £37m – a drop from the £38.8m reported the previous year.

The update knocked 12 per cent off Shanks' shares, which fell 11.25p to 79p. The stock had gained 19 per cent over the previous three months.

However, the company sought to put a brave face on the situation, pointing out that not all of its businesses were suffering. The chief executive, Peter Dilnot (pictured), said: "While market conditions in solid waste remain very challenging, our organics, hazardous waste and UK municipal businesses are performing well and we are continuing to invest for future growth.

"Our cost reduction plans are progressing well and, with the new organisation in place, the group remains firmly on track to deliver profitable growth in the medium term."