'Brexit vote to hit European building materials firms in UK' - Moody's
05/07/2016 18:20
By Georgina Prodhan
FRANKFURT, July 5 (Reuters) - Britain's vote to leave the
European Union will hurt the earnings of European building
materials firms' UK operations, Moody's said a day after a
report that Britain's construction industry suffered its worst
contraction in seven years.
The credit ratings agency said French building materials
group Saint-Gobain SCOB.PA and Austria's Wienerberger
WBSV.VI , the world's biggest brickmaker, were likely to feel
an immediate impact from falling house prices as the most
exposed to the British residential market.
Cement and aggregate producers HeidelbergCement HEIG.DE ,
CRH CRH.I and LafargeHolcim LHN.S , whose infrastructure and
commercial construction projects typically run for a year or
more, faced longer-term challenges, Moody's said.
Worries about the economic impact of leaving the European
Union hit Britain's property market and sent the pound to new
31-year lows on Tuesday, while Conservative lawmakers began
voting for a new prime minister following David Cameron's
resignation. urn:newsml:reuters.com:*:nL8N19R2MK
Investors sold out of a range of stocks connected to the
industry, including property firms, listed real estate
investment trusts, asset managers and insurers, and two British
commercial property funds suspended trading. urn:newsml:reuters.com:*:nL1N19R06E
The European construction and materials index 0#.SXOP fell
2.1 percent, with Wienerberger down 4.5 percent, Saint-Gobain
down 2.5 percent and CRH down 3.2 percent.
Financial data company Markit said on Monday its
construction Purchasing Managers' Index plunged to 46.0 in June
from 51.2 in May, its lowest level since June 2009, in what
could be a sign of worse to come. urn:newsml:reuters.com:*:nL8N19Q1OO
It was the first time since April 2013 the index had fallen
below the 50 level that separates contraction from expansion.
However, Moody's said the hit to the earnings of the five
European building materials companies, who all generate roughly
10 percent of their profits in Britain, was not likely to be
enough to affect their credit ratings. urn:newsml:reuters.com:*:nMDYbtn9PM
It added that their currency exposure was mostly related to
the conversion of profits in pounds to euros or Swiss francs,
with most production being local, using UK-sourced raw
materials.
Kepler Cheuvreux equity analysts also pointed to
Wienerberger and CRH in a note last week as having material
exposure to Britain, along with Dutch firm BAM BAMN.AS ,
Spain's Ferrovial FER.MC and Swiss company Zehnder ZEHN.S .
Deutsche Bank analysts, in a note on Monday, made minor
changes to target prices for European building and construction
firms, but said longer-term global growth prospects and currency
moves were more of a concern than the immediate effect on
earnings from a UK slowdown.
"Without glimpses of macro support, it is hard to see the
performance of share prices in the sector being much better than
lacklustre," they wrote.
(Additional reporting by Lina Saigol; Editing by Greg Mahlich)
((georgina.prodhan@thomsonreuters.com; +49 69 7565 1279;
Reuters Messaging:
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Keywords: BRITAIN EU/CONSTRUCTION