Shares in building materials group Heiton fell by 10 per cent on the Dublin market yesterday after the group became the latest public company to issue a profits warning.

Heiton shares fell 25 cents to €2.25, their lowest level for almost two years, and the company is valued at €112 million (£88.1 million) at this price. The deterioration in the price will inevitably generate renewed speculation that rival builders merchants Grafton will add to its existing 22.5 per cent stake in preparation for a takeover bid. Grafton shares rose four cents to €3.03, indicating a view in the market that Heiton's problems are specific to the company and not due to a general downturn in the sector.

Grafton can sit pretty with its stake and prevent anybody else taking over Heiton, but the synergies between the two are huge.

"There's a huge amount of money to be saved and if Grafton could get a bid by the Competition Authority, it's a win-win situation," said another analyst.

Analysts reflected the view that it was a company-specific issue and downgraded their forecasts for the group. Goodbody analyst Mr Robert Eason cut his 2001 earnings forecast from 40.4 cents to 36 cents per share, which leaves the company trading at little more than six times future earnings.

Part of the problem is down to a substantial debt with one customer, understood to be housebuilder Lark Developments, which went into examinership this week.

Heiton chief executive Mr Leo Martin said the double-digit growth in the group's turnover in the first half of the year had fallen to high single-digit growth.

"We're also seeing our cost base rising faster than in previous years, especially pay and insurance," he said, adding that the group's Cooper Clarke subsidiary in Britain continued to disappoint.

Some analysts believe that Cooper Clarke may be divested.