Downturn in house building to hit profits at Grafton

THE FALL in house building has hit profits at building materials and DIY group, Grafton, the company warned yesterday.

In a statement issued ahead of its annual general meeting in Dublin, Grafton said that group profit before tax for the first four months of the year was "significantly down" compared to the same period in 2007.

"Group turnover in the first four months of the year declined by 8 per cent to €944 million and reflects the adverse translation impact of a 12 per cent decline in sterling against the euro. Irish sales fell by 16 per cent," Grafton said.

The statement did not say by how much profits were down, however, chief executive, Michael Chadwick, told The Irish Times that they had slipped by more than 8 per cent.

Grafton's statement said that the Irish building repair, maintenance and improvement market is holding up well, while non-residential building remains strong.

The group's main plank in commercial building and infrastructure development is its steel supply business. It is the largest operator in this sector in the country.

Mr Chadwick said yesterday that activity in commercial building continues to be good. "There's still good demand for office space in Dublin and other areas," he said.

He agreed with complaints from some of the group's competitors that public building projects, which were expected to take up some of the slack left by declining house construction, are not coming on stream as quickly as expected. "We would regard that as a fact of life," he added.

Grafton is best known for its ownership of the Atlantic Homecare and Woodies' DIY chains, as well as its Chadwicks and Heiton Buckley builders' suppliers. It has a range of businesses in the same sectors in Britain.

In Britain, it said that the residential repair and improvement market has "demonstrated resilience" despite lower investment and spending on housing.

"The group's UK merchanting business experienced positive trading conditions in the first quarter with low single digit growth in like-for-like sales," its statement said.

It added that the market weakened in April, but said that overall UK sales were up 10 per cent in the first four months of the year.

"Ongoing development of the UK merchanting business continued with the completion of five acquisitions trading from 11 branches with an annual turnover of approximately €40 million and the opening of 11 branches." Most of these were in its Buildbase business in Britain.

Overall, Grafton said that it is seeking to cut costs to bring them into line with lower volumes. It added that its financial position and cash flow leave it well placed to cope with the tougher markets.