Investment Column: One to avoid as bumpy road looms for RMC
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Your support makes all the difference.RMC Group, the aggregates, asphalt and cement business, has come unstuck in the past few years. The recession in Germany means there has been a slump in demand, while production in one of RMC's UK plants ground to a halt earlier in the year due to a problem with its raw materials supply.
RMC Group, the aggregates, asphalt and cement business, has come unstuck in the past few years. The recession in Germany means there has been a slump in demand, while production in one of RMC's UK plants ground to a halt earlier in the year due to a problem with its raw materials supply.
The group reported a 53 per cent drop in pre-tax profits for the past six months, and an 8 per cent drop in turnover. But stripping out the costs of restructuring and downsizing the German business, underlying pre-tax profits were up 23 per cent.
The management is more than 12 months into its cost- reduction plan and cement prices in Germany appear to be recovering. A housing boom in the US led to a 74 per cent increase in earnings there and the buoyant economy in North America is propping up demand.
But the road ahead for the UK, which accounts for about 20 per cent of the group's earnings, looks bumpy. The Government's Highways Agency has reduced spending on new roads and construction work is still sluggish.
At 620p, down 7p, RMC is trading at around 11 times earnings and has a healthy dividend of about 5 per cent. Although it is confident of meeting expectations, the group's turnaround is far from cemented. A strategic review is still under way and further potholes could emerge. Avoid.
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