Exchange rate averaging boosts RMC

RMC gave last year's profits a pounds 20m boost yesterday by translating its overseas earnings at average exchange rates rather than using the pound's sky-high year-end value. The ready-mixed concrete and quarrying group said it was one of the last companies in the FTSE 100 index to make the move although it admitted its decision had been influenced by the extreme volatility of the foreign exchange markets last year.

Even using the new accounting method, RMC announced a sharp fall in profits, from pounds 324.9m to pounds 295.3m, after a slump in Germany, which traditionally provides more than half the company's profits but was hit last year by a slowing economy and poor winter weather in the first half. RMC shares closed 7.5p lower at 993.5p, well below the peak of pounds 11.95p reached last September.

Peter Young, chief executive, said he expected further falls in volumes this year in Germany although at a slower rate than last year which saw reductions of up to 9 per cent. Profits in Germany tumbled from pounds 187.5m to pounds 139.6m, mirroring the large drop in German profits announced recently by Redland, the other British construction materials company with a large exposure to that country.

RMC has reduced its 12,000-strong German workforce by about 1,400 in the past 18 months to cope with the first reduction in sales volumes in the former eastern states since re-unification and the challenge of cheap concrete imports from Poland.

On the old translation basis RMC's figures were at the top end of analysts' expectations as weakness in Germany and France was offset by strong performances from American and Israeli operations. Profits of pounds 275.8m compared with expectations of as low as pounds 250m, struck from flat turnover of pounds 4.08bn. Earnings per share fell from 80.3p to 68.9p, but the company's conservative dividend cover meant the payout could still be increased by 6 per cent to 26.5p.

At home profits fell slightly to pounds 72.8m (pounds 76.8m) as the construction industry continued to struggle against a lack of significant recovery in the new housing market, government cutbacks in finance for new roads and slower progress than hoped for on the private finance initiative.

Mr Young called on the next government to reverse Britain's consistent under-investment in infrastructure spending, which he said had created a construction industry in this country only one third the size of that in Germany. The industry represented only 8 per cent of gross domestic product in Britain compared with 12 per cent of a larger economy in Germany and 15 per cent in Spain.

"There are no votes in putting anything right in this country," he said. "There will be in 10 years when the whole place is gridlocked; by then it will take another 20 years to catch up."

Describing the UK attitude to public sector construction as "a morass of mis-information", he called on the Government to settle on a transport policy that would include road and rail. He said, however, he had little confidence that such a policy would emerge.

RMC said it would be interested in acquiring the French aggregates operations recently put up for sale by Redland, but doubted whether its British rival was yet realistic about the price a bidder would pay.

Investment column, page 26