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Thursday, October 28, 1999 Published at 16:43 GMT 17:43 UK

Business: The Company File

Warning hits Blue Circle shares

Blue Circle is the UK's largest supplier of cement

British building materials company Blue Circle Industries has seen its market value plummet 20% after a surprise profit warning.

Shares in the company finished the day 66.5p lower at 269.5p after the profit warning, their lowest level this year.

The UK's largest cement producer said difficult trading in Asian markets had resulted in an 18% decline in its 1999 pre-tax profits to 260m ($427m) from 317.6m last year.

Warning surprises analysts

Analysts said the warning was a bolt from the blue. They had been expecting a figure in the region of 300m although some were wary of the effects of an erratic market in Malaysia.

"For a long time I have thought there was too much hope in an Asian recovery built into the price of the stock," said Arend Dikkers, analyst at Salomon Brothers in London, who said he would maintain a "hold" rating on Blue Circle's shares.

The company said it expected an operating loss from its Asian operations this year as prices in the Malaysian cement market had fallen by 4% since July to $43.40 per tonne and could fall "significantly further" this year.

It also said that in the Philippines prices had recovered somewhat, but imported competition was affecting volumes.

Outside Asia, Blue Circle said it expected cement demand in Chile to be about 25% lower this year and forecast one-off effects on its US operations from severe weather on the east coast of the United States.

Blue Circle has repeatedly warned about tough trading conditions in its Asian markets, but expectations improved after the half-year results in September when chief executive Rick Haythornthwaite said the future was looking brighter.

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