Building materials group Grafton has swung back into first-half operating profit and forecast further improvement in the second half as aggressive cost cuts taken last year take hold.
Grafton reported an operating profit of €14.8m after an €8.3m loss a year earlier, after lower costs outstripped a 1% fall in revenue to €979m. Pre-tax profits were €13.4m, up from €3.7m a year earlier when the figure was boosted by property sales.
The group said the improved trends in turnover were sustained in July and August, establishing a base for renewed earnings growth.
'The market challenges faced by the group over recent years eased considerably in the first half. Grafton's profits are now recovering and we expect further profit improvement in the second half,' executive chairman Michael Chadwick said.
Grafton said the overall outlook had improved in Britain where it owns and operates Buildbase builders' yards, but there were signs of consumer sentiment weakening over concerns about cuts in government spending.
The outlook for Ireland, where it owns the Heiton Buckley builders' merchants and the Woodie's and Atlantic Homecare DIY chains, is for a tentative recovery to take hold and for modest growth to return in late 2011, the company said.
A breakdown showed that profits from Grafton's builders' merchanting business more than doubled to €27.4m on marginally lower turnover, helped by growth in the UK. Losses in the manufacturing business narrowed to €2.3m, but retailing losses doubled to €1.2m as turnover fell 7%.
An unchanged interim dividend of 2.5 cent has been approved.
Grafton shares closed 5.6% higher at €2.69 in Dublin this evening.
