Grafton sales fall 32% to €470m

Builders’ merchants Grafton Group said first quarter revenue fell 32 per cent to €470 million.

Grafton’s Michael Chadwick told the company's agm in Dublin today he doesn’t anticipate “any great difficulty rolling over the bank borrowings we wish to roll over this year.”

The company has cut costs and expects to achieve full-year savings of €55 million in 2009, it said in a statement.

“The reduction in overheads is now clearly evident in the reduced cost base which has mitigated the effect of the decline in turnover on group profitability,” it said. Grafton operates the Atlantic Homecare and Woodie's chains.

Grafton described the current trading conditions as the most challenging in decades and said the reduced availability of credit “has led to significantly lower investment and spending on housing and residential repair, maintenance and improvement”.

It said the trading environment for the first four months of the year was “very much weaker” than the same period in 2008.

Turnover for the three months to March 31st was €470 million, down €220 million or 32 per cent compared to the same quarter last year.

The merchanting business - which accounted for 85 per cent of turnover - has experienced a 25 per cent. Grafton’s Irish branches which provid 24 per cent of turnover saw a decline of 45 per cent.

Grafton’s retailing business which is predominantly based here held up relatively well with a 17 per cent decline in turnover.

The company said cost cutting had mitigated the effect of the turnover fall on profitability.

Grafton expects a seasonally stronger trading period in the second half of the year and is planning a further €55 million in cost cuts.

In a note to investors Davys said at first glance ”the stand-out point is that trading in the Irish merchanting business is weaker than expected, offset to some extent by a lower-than-expected decline in Irish retailing revenues”.

It said the decline in revenues indicates that the weakness in sterling relative to the is another headwind for the company which garnered 61 per cent of revenues from the UK last year.

At 9.30am Grafton shares were down 4.5 per cent at €2.51 in Dublin giving the company a market capitalisation of €586 million.

Additional reporting Bloomberg