Shares in Readymix fell sharply yesterday as analysts downgraded their forecasts in the wake of Friday's profit warning from the company.
The stock closed 8 per cent lower at €1.70, having fallen by as much as 15 per cent earlier in the day, as the market responded to last week's warning that profits this year would be substantially below market expectations for 2004. The company blamed an erosion in margins in the third quarter which has accelerated in the fourth quarter, reducing profitability both North and South.
Despite the current boom in the Irish construction industry, a combination of rising raw material and transport costs allied to a tough pricing environment have squeezed the company's profits and analysts see little let-up in sight. "My best guess is that it will be the same again next year," said one analyst, adding that an improvement in pricing would be the big swing factor for the company. Analysts set about slashing their 2004 forecasts yesterday, cutting their adjusted earnings per share forecasts by more than 35 per cent.
Mr John Sheehan, analyst at NCB Stockbrokers, is now looking for adjusted EPS of 8.4 cent, down from his previous forecast of 13.4 cent and well off last year's figure of 16.9 cent.
Merrion Stockbrokers has also made sharp cuts to its forecast, reducing its estimate for adjusted EPS by 35 per cent to 8.7 cent.
Meanwhile, Goodbody has cut its recommendation on the shares from "reduce" to "sell". However, the broker noted that a dividend yield of around 4 per cent, hidden value in its property assets and the prospect of corporate activity should lend some support to the share price.
