Grafton To 'Feel The Pinch' Of Downturn

Reports have suggested the downturn in house completions - expected next year - will hit the building supplies industry hardest.

Predicted falls of 45,000 to 28,000 completions, during 2009, will also have a major impact on market leaders such as Grafton Group, according to the Irish Examiner.

Earning potential for the group could see a sharp fall, resulting in a 17% decline in earnings per share this year to 35%, compared to the expected 42%.

Merrion Stockbrokers has cut the group's 2009 forecast by two thirds. It has been suggested the firm's EPS will fall to 13%, a steep drop on the predicted 37%.


Merrion suggested the slump could be directly attributed to the housing market slowdown, but this however was not the only contributing factor, according to the stockbroker.

Like for like sales for the second half of this year are expected to be down almost 20%, with full year figures reportedly set to creep up to a 19% loss.

The impact on operating margins will be quite sharp as tougher trading conditions force the group to cut prices, according to the Irish Examiner.

This could mean margins this year will finish at 5.5%, compared with 9.9% in 2007.

However, it would seem the entire industry is on the cusp of a even sharper decline, expected across Britain and Ireland next year.

Sales in Ireland will fall by 15% in 2009 on a like-for-like basis, against its previous forecast for a 7% decline, while margins will be close to bottom at 1.9% against earlier estimates of 5.4% for the 12 months, the Irish Examiner reported.

Despite this, Merrion Stockbrokers said the group’s operations remained sound.

Grafton is a leading building supplies group, which also runs a number of nationwide DIY stores.

(PR/JM)