Hanson: Will the US Asbestos compromise work?

Hanson sees tough start to 2006
Tue Dec 20, 2005 09:14 AM GMT
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By Miyoung Kim
LONDON (Reuters) - Building materials firm Hanson said weak UK demand and high energy costs could hit the first half of next year after an 11 to 13 percent pretax profit rise in 2005.

The profit forecast for end-December, broadly in line with expectations of around 420 million pounds, compares with 377.1 million pounds profit a year ago and is powered by strong performances at the firm's U.S. operations.

But the slower UK business helped send the stock down 1.4 percent on Tuesday to 614-1/2 pence in early trade, among the FTSE 100 index's biggest fallers and valuing the company at about 4.4 billion pounds.

"In the near term, demand weakness in the UK and ongoing energy cost increases may impact the first half of 2006 against a strong first half in 2005," Hanson said in a trading update.

Britain's housing market boomed from the late 1990s until a series of interest rate rises slowed business in mid-2004.

The company (HNS.L: Quote, Profile, Research) , which produces crushed rock, sand, gravel, concrete products, clay bricks and asphalt, said it expected operating profit to rise by a similar percentage to pretax profit from 423.9 million pounds last year.

Analysts at house broker ABN Amro said they were keeping their pretax profit forecasts at 420 million pounds for 2005 and 450 million pounds for 2006.

Hanson said its Aggregates North America division was expected to show a strong earnings increase, as price rises of some 8 percent in aggregates and over 10 percent across other product lines offset higher costs and lower volume.

A four-year housing boom in the United States has helped Hanson push its prices ahead of cost increases for raw materials. North America accounted for some 44 percent of turnover and 53 percent of profit in the first half.

In the UK market, volume of building products dropped significantly, with demand for bricks expected to fall more than 10 percent, while energy costs continued to rise, underlying the tough trading environment.

Hanson will announce its annual results on February 23