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Shares hit after Shanks profit warning

Prices tumbled yesterday after the firm warned profits would be hit by the recession.

Share prices in Shanks fell by 16p after the waste firm warned that profits would fail to meet forecasts. In a trading statement it blamed European economic conditions for falling commercial, industrial and construction waste output.

John Lawson from Shanks’ broker Investec Securities told the Guardian the company’s twelve-month target price had been lowered from 120p to 104p. But, he added, the group’s issues were cyclical and profits would bounce back when markets recover.

Investec revised guidance for the firm’s annual profits from £34.5m down to £29m.

Shares in the company fell by up to 15% on Wednesday as traders reacted to the news, closing down 9% at 82.45p. The share price recovered slightly on Thursday morning gaining around 3% back.

In the statement Shanks said market conditions in the UK and Dutch solid waste markets had “deteriorated significantly” since it reported a “robust” performance in May.

“The UK and Dutch solid waste businesses have been impacted by the Northern European recession and record lows in construction output. Falling recyclate prices, lower volumes and increased price competition during the summer have put pressure on margins,” it read.

It said benefits delivered from cost cutting and investments would not now “offset the challenging conditions in the solid waste markets”.

Peter Dilnot, group chief executive, said: “While market conditions in solid waste remain very challenging, our organics, hazardous waste and UK municipal businesses are performing well and we are continuing to invest for future growth.

“Our cost reduction plans are progressing well and, with the new organisation in place, the Group remains firmly on track to deliver profitable growth in the medium term.”

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