THE strong pound and weak Continental economies have depressed profits of RMC, the ready mixed concrete and building materials group.
Profits for 1996 fell by 12% to #296m using average exchange rates and excluding exceptionals. Despite the reduction dividends are raised by 6% to 26.5p after a final of 18.7p.
The result was slightly ahead of expectations and RMC shares initially jumped 17p but closed 13!sp down at 987!sp after profit-taking, having risen 26!sp on Wednesday.
Construction output in Germany declined by 2.7% in 1996 and the group's ready mixed volumes fell 7%. In eastern lander, RMC conceded some market share to hold margins in a market affected by over-capacity. In western Germany margins remained satisfactory.
Aggregates deliveries were maintained as a result of extra capacity though prices were under pressure. Sales of cement and related products were ahead.
RMC is reducing capacity and there were redundancy costs of #17m.
New capacity offset national volume declines of ready mixed and aggregates in France but profits were lower as margins deteriorated. Spain had another difficult year. In 1997, RMC sees its German operations improving profits as cost-reduction programmes take effect.
Mike Foster, an analyst with Credit Lyonnais Laing, said: ''The situation in Germany seems to have bottomed out, but for us to get enthusiastic about RMC it would have to be improving a lot more than it is.''
Elsewhere in Europe, lower levels of construction activity are expected to continue, though some of the smaller countries could experience better conditions.
UK profits dipped from #77m to #73m owing to flat housebuilding and infrastructure markets. Ready mixed volumes fell 4% and margins were lower. Aggregates volume were down 8% but prices firmed slightly. Demand generally was better in the second half than the first. Owing to cutbacks in the roads programme, deliveries of coated stone were down 16% nationally and dry stone by 11%. But prices were firm.
RMC's volume were down less, helped by the purchase of the Hargreaves business. Building products saw signs of recovery towards the end of the year. The DIY retailing operation Great Mills did better, showing a ''healthy'' increase in sales and profits from its 92 outlets.
In the current year, RMC says it will benefit from an upturn in demand from housebuilding and commercial development.
RMC's activities in the US did well, assisted by a first full-year contribution from the business in Arizona, and is expected to continue to do so. In Israel overall construction activity increased a little and profits moved ahead, though RMC considers political uncertainty could affect current buoyancy in the market.
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