RMC set to pull out of Germany

BUILDING materials group RMC looks set to sell its troubled German division in a strategic review aimed at reducing its net borrowings to below £1bn by the end of next year. Other businesses worldwide could also be sold in the review, which has prompted by the woes of its German business.

The slump in Germany began seven years ago for RMC as construction activity, prompted by the reunification of East and West Germany, collapsed by more than a half. Half of RMC's earnings used to come from Germany. Today less than 1% of its profit comes from the area.

Earlier this month chief executive Stuart Walker said he saw no prospect of a recovery in Germany until 2003. Cost-cutting there has already saved the group £25m and led to the closure of 40 plants and the loss of 650 jobs.

Construction throughout Germany has been more or less at a standstill this year despite the boom in surrounding eastern European countries.

In RMC's latest statement, Walker confirmed that RMC was carrying out a strategic review 'of its options regarding certain of its businesses, including those in Germany'.

Although the review is at a preliminary stage, it could be completed within weeks, freeing up negotiations for the sale of its German business. Last year German underlying profits slumped to £4.6m against £49.1m in the previous period. That helped cut group profits by 18% to £170.7m.

There were fears in the market that RMC might cut its dividend when it announced its 2001 figures earlier this month. In the event, the total increased to 31.2p a share from 31p. The strategic review may be an attempt to preserve the dividend this year. The shares rose 55p, or 9%, to 668p.