VIENNA (Reuters) - Brickmaker Wienerberger (WBSV.VI) warned on Thursday that it expected the residential construction market in Britain to stagnate or shrink over the next few years, sending its share price down by more than 6 percent.
The Austrian group, which generates around 10 percent of its annual sales in Britain, maintained its full-year profit target for a 9 percent rise in adjusted earnings before interest, tax, depreciation and amortisation to 415 million euros ($487 million).
Second-quarter EBITDA rose 4 percent to 144.1 million euros.
Although sales and profits rose at its bricks business in the quarter, its pipes and paving stones unit, which generates about a third of group sales, saw a 20 percent decline in EBITDA due to a lack of public orders and higher raw material prices.
In Britain demand for Wienerberger’s bricks and roof tiles increased enough in the first half of the year to more than offset the negative effects of a weaker British pound.
But the group does not expect the trend to continue, Chief Executive Heimo Scheuch said at a news conference.
“We do not assume that (the residential construction sector) will grow steadily in Britain, but that it will be rather stable or even decrease in the next few years,” Scheuch said.
Strong demand in Britain is currently supported by government aid programmes for new housing construction, according to Wienerberger.
Last year, revenue in the country fell 5.1 percent, strongly influenced by the fall in the pound after Britain voted to leave the European Union.
Wienerberger’s share price was down 5.5 percent at 18.855 euros by 1025 GMT, when the Stoxx Europe 600 construction and materials sector index <0#.SXOP> was down 0.3 percent.
The statement on the British market did not go down well with investors as Britain is regarded as one of the most profitable markets for Wienerberger, Kepler Cheuvreux analyst Stephan Trubrich said.
“In addition, they lowered their forecast for the German brick market, and the western European pipe business lags expectations,” Trubrich said.
Wienerberger said in its second-quarter report that it was seeing a reduction in the number of building permits for single- and two-family homes in Germany, while it had said three months earlier that it expected an increase.
Revenue in the pipes and paving stones business fell 4 percent in the second quarter, partly due to less international business projects.
Reporting by Kirsti Knolle; Editing by Edmund Blair, Greg Mahlich