Building materials group Grafton has announced pre-tax profits for the year ending December 2009 of €13.6m - down 79% from the €64m reported in 2008. Its shares, however, closed more than 16% higher.
The company said its revenues fell 26% to €1.98 billion from €2.67 billion after what it called the most difficult background to trading for decades. Basic earnings per share fell to 5.8 cent in 2009 from 32.2 cent in 2008.
Grafton said, however, that its trading outlook is beginning to improve following a period of significant uncertainty.
Although sales were affected by the severe weather conditions in the first two weeks of January, it said that sales since then have been close to expectations with good increases in the the UK housing sector.
In today's results statement, Grafton said that the pace of decline has moderated in Ireland. It said the economy and housing market here have been amongst the hardest hit by recession.
Although near term risks and challenges remain, it said the anticipated recovery presents the group's merchanting and DIY businesses with a significant medium term growth opportunity.
The company said that extensive measures were taken during the year to reduce its cost base by €85m a year in order to manage the business through the current recession.
The company's staff number have dropped by about 2,500 in recent months. Chief executive Leo Martin said the staff cuts were regrettable, but that the firm still employs just under 9,000 people across its markets.
He said the job cuts were essential to protect remaining jobs and the company.
Merchanting division's profits slump
Grafton said that turnover in its merchanting business fell by 26% to €1.69 billion. Operating profits, before rationalisation costs, fell to €39.3m from €121.9m in 2008.
The merchanting business traded against a backdrop of declining economies in both Ireland and the UK. Grafton said the downturn affected all sectors of both economies and especially the housing market which experienced declines in private sector investment of about 30% over the two years to the middle of 2009 in the UK and up to 50% in Ireland.
It said that its merchanting branches in Ireland recorded a turnover decline of 42% to €370m from €642m. The branches reported an operating loss of €10.3m before a property profit of €6.1m. This compared to a profit of €48.3m in 2008.
Grafton said that the number of housing completions in Ireland last year is estimated at 17,000 units - less than a fifth of output at the peak of the market in 2006. It estimates that less than 10,000 units will be built here this year and most of these will be once-off houses as scheme house and apartment construction has decline to 'negligible levels'.
However, the business increased its share of the RMI market, with its Heiton Buckley and Chadwicks performing relatively well.
Revenues at retailing division down 18%
Grafton said that turnover fell by 18% to €248m from €303m at its retailing division. Operating profits of €3.3m were reported compared to profits of €11.8m in the previous year.
The company said the 41 DIY stores and seven kitchen showrooms in Ireland faced the 'toughest ever trading conditions'. It said that declining employment and incomes, higher taxes, increased savings and a fall in personal wealth all contributed to weak consumer confidence and the highest fall in retail sales on record.
Grafton said that its Woodie's chain consolidated its position as the leading DIY retailing brand in Ireland. It added that the impact of the very sharp fall in volumes was partly mitigated by significant action to improve the ongoing operational efficiency of the business.
Turnover at the group's manufacturing division slumped by 47% to €45.1m and it reported an operating loss of €5.1m, before rationalisation and impairment costs. The division suffered from very weak residential construction markets in both the UK and Ireland.
Grafton said that the strength of the economic recovery in Ireland will be influenced by the pick-up in the global economy and growth in exports aided by increased competitiveness.
'Low consumer confidence, a weak labour market and tight credit conditions are likely to weigh on near term demand in the RMI and DIY sectors,' the company said.
'The group's strong businesses and financial strength position it to consolidate market share in its key markets. With a lower cost base and a more integrated merchanting business, it is well placed to benefit from its operating leverage as its markets recover,' it added.
Shares in the company were up 15.3% to €2.82 in Dublin this afternoon, up 37 cent.
