City takes fright at rising energy costs and sells shares in BPB, RMC, Hanson, Wolseley and Aggregate Industries.
Shares in materials firms were this week hit by a wave of selling after plasterboard manufacturer BPB warned of reduced earnings from its North American operation. Shares in BPB fell 14% to 206p, their lowest value for 18 months.

BPB’s fall in value comes during a period of sharp drops in the share values of RMC, Hanson, Aggregate Industries and Wolseley as investors became concerned about the effect of rising energy costs on materials firms.

Although BPB’s share price recovered marginally to 224p early this week, analysts said its plight was symptomatic of the troubled state of the sector.

RMC, a former darling of the construction sector, has suffered a 13% fall in its share value since announcing poor interim results at the start of September.

Hanson slumped to 332p, its lowest price of the year, although its recent exit from the FTSE100 may have compounded its problems.

The only materials group to escape the slump was Blue Circle. Analysts said this was a result of investors holding on to their stock in anticipation of a renewed bid by French rival Lafarge.

Analysts put the problems suffered by the materials groups to the City’s poor view of the manufacturing sector and recent falls in the stock market as a whole.

Kevin Cammack, a construction analyst at Merrill Lynch, said traditional sectors such as manufacturing were out of favour with investors.

He said: “The market has been really harsh on companies in the old economies that have failed to deliver earnings.”

Mike Betts, an analyst at JP Morgan, said increases in energy prices and the delays in American road-building programmes were significant factors in the downturn.

He said: “The USA, European and UK economic cycles are much closer together than they have been in the past. There are more global factors having an effect on the materials sector.”

Analysts were not convinced that the share drops signalled a long-term slump in the sector.

Cammack said: “It’s difficult to imagine that oil and other commodity prices will go up to the same degree as they have in recent months.”

Leslie Kent, an analyst with Seymour Pierce, said the overall prospect for construction was still strong. He said: “Construction activity is still fairly stable. The market gets panicky over all sorts of things.”