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23Aug91 UK: RMC AND REDLAND FEEL AFFECTS OF SOVIET COUP AS SHARE PRICES SLUMP.

By Bill Fishlock.Fears that the pace of reconstruction work in east Germany will slow following the Soviet coup took its toll on shares in British building materials companies, including RMC and Redland.Stockbroker Morgan Stanley said the coup would increase the cost and the risk of restructuring in eastern Europe. It would put pressure on the deutschmark and may cause a further rise in German interest rates, thus prolonging the downturn in Europe.Shares in RMC, which relies on Germany for some 42 per cent of profits, and Redland, the largest concrete roof tile maker in Germany, both fell by around 7 per cent on news of the coup.Their performance contrasted with other building sector shares which were generally spared the heavy markdowns.Last year RMC paid DM 160 million for a 64 per cent stake in east Germany's largest cement maker Rudersdorfer Zement, located 30 km east of Berlin, which produces some 2.5 million tonnes of cement a year.A spokesman for RMC, which is also Germany's largest aggregates producer, said the company did not expect to be seriously affected.A spokesman for Redland, which has pursued the eastern Europe market most energetically among the British materials groups, said the company saw 'no cause for alarm'.Redland has acquired and modernised the major concrete roof tile facilities in east Germany and has interests in Hungary, Czechoslovakia and Yugoslavia. The company 'did not see the clock going back in east Germany'.However, analysts remain concerned that the recent rises in German interest rates will eventually take a heavy toll on the country's house building volumes. It may also affect the building market in the Netherlands, where the largest UK merchant, Meyer International, operates.However, the prospect of a stronger dollar will increase the sterling value of the US profits which the building materials industry has come to rely on in recent years.