LONDON (ShareCast) - Steel firm Severfield-Rowen is struggling against weakening demand from the construction sector and pricing pressure as competitors fight for market share.

Underlying profits before tax in the six months to the end of June were £1.5m, against £3.4m in the same period of 2011, despite revenues growing from £122m to £135.9m.

The problem for Severfield-Rowen has been pricing; as demand from the building industry in the UK has weakened, so it has had to lower prices. The firm was also hit by cost overruns on two major projects, reducing the margin from 4.7% in 2011 to 1.8% this year.

The group’s UK order book is now at £218m, up slightly from the £216m seen in May, while its Indian joint venture has orders worth £31m.

The interim dividend has been maintained at 1.5p per share.

Tom Haughey, Chief Executive of Severfield-Rowen, said: “The group has continued to encounter challenges in the UK business with diminishing overall UK construction demand, the re-emergence of pricing pressure and the protraction of contractual settlements.

“Despite the backdrop, the UK order book remains stable at £218m, which maintains full activity at all UK plants into 2013 and suggests further growth in market share. UK margins are nonetheless coming under pressure again as clients and the supply chain push much harder to compete in a shrinking market.”

He added: “Competitors in our sector remain under significant pressure, reflected in many cases by loss-making financial returns which are not sustainable and further rationalisation is expected in the industry.”

By 11:36 the shares had fallen 5.5% and are now down 17.4% since January.

BS

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