CRH shares fell sharply after the company disappointed the market with a profits warning. The shares closed down €1.16 at €16.07 last night after the building materials group said 2001 profits before tax would be between €760 million (£599 million) and €790 million against already reduced forecasts of €811 million to €820 million.

It warned of "continued challenging trading conditions" in the first half of 2002.

While the group's forecast outcome for the year to end-December would mean profit growth of 9 per cent to 13 per cent on the €697 million out-turn for 2000, the early morning statement was followed by the third round of cuts this year in stockbroker forecasts.

CRH blamed deteriorating consumer confidence in the US and the knock-on effect on its European operations, where negative trends already identified at the interim stage "have gathered pace".

But finance director Mr Harry Sheridan described the trading statement as "in many ways a good news story".

Despite the impact of the September 11th terrorist attacks, CRH will show a good increase in profit over 2000, he said.

"In time this will be seen as an excellent performance," he forecast. The impact on profits would be contained to between 4 per cent and 7 per cent of previous expectations, he said, adding that the share price fall was more a knee-jerk reaction than a reflection of the reality.

At Goodbody, Mr Robert Eason reduced his 2001 forecast to €770 million from €811 million. Merrion said a downgrade of 6 to 7 per cent was likely, while broker to the company, Davy, cut its 2001 forecast to €775 million from €820 million, and to €810 million from €905 million for 2002.

The CRH statement followed a cautious trading outlook issued in early September with its interim results.

At that time - before September 11th - group chief executive Mr Liam O'Mahony said Europe would be "the disappointment this year" and analysts then made their first profit downgrades.

In its latest statement, CRH said: "In more recent weeks, due to the impact of declining consumer confidence, increasing job layoffs and security fears, there has been a softening of demand patterns, particularly for those of our US operations exposed to the residential and non-residential construction sectors.

"Our European operations have also been impacted and the negative trends already identified in the interim report have gathered pace. . ."

CRH said it was continuing its "ongoing process of ensuring our businesses are efficient and that costs are reduced".

As part of this process, the group is closing a clay products facility in Germany and further rationalisation is likely in that country where, along with Poland, there is significant overcapacity.

On the outlook for 2002, the group said the medium-term impact of the terrorist attacks and ensuing events were "impossible to quantify precisely" but it anticipated "continued challenging trading conditions in the first half of 2002".

Strong infrastructural programmes should underpin construction activity in a number of its major markets, with a possible boost from further "employment-generating public-spending measures", the group said. But with gross domestic product growth forecasts cut in most major economies, it warned that public spending "may not compensate fully for weakness in private sector construction, despite recent reductions in interest rates".