Building materials group Readymix delivered a 17 per cent increase in pretax profit in the first half of the year, but warned that higher energy and raw material costs were putting pressure on the group's margins.

Chief executive Roger Gonzalez said he was pleased with the performance, but said it remained to be seen whether the group could maintain it for the rest of the year.

It is currently forecasting growth in operating profit before exceptional items of between 20 and 25 per cent for the full year - in line with the growth seen in the first half.

"At this stage I would be optimistic that we will replicate what we have achieved in the first half," said Mr Gonzalez. "The second half has started well."

Pretax profit was €32.3 million in the six-month period, up from €27.6 million a year earlier. Operating profits before exceptional items, including some property and unit sales, were €10.1 million, compared with €8.1 million.

While the aggregates business, which extracts sand and gravel to make cement, performed well in the period, Mr Gonzalez said there had been a slowdown in the flooring operations. However, he said the division had seen some upturn since the end of June.

Total revenue slipped 4.6 per cent, to €119.5 million in the first half, as a result of the closure of its road-surfacing business and the sale of a plant and equipment unit in 2005. Mr Gonzalez said he expects full-year revenue to be down by a similar percentage.

He said the company hoped to maintain the 5 per cent increase in cement prices it had introduced during the first half of the year in a bid to help offset some of the higher raw material and energy prices.

Readymix, which is controlled by Mexican group Cemex, has benefited from a restructuring last year. The group closed its road-resurfacing division and also sold several properties, boosting profits on a one-time basis.

Mr Gonzalez said there are still some cost cuts to be made, in particular in relation to improving the company's IT system. Capital expenditure declined 30 per cent in the 12 months to the end of June as a result of the clampdown.

"Initiatives in recent years position Readymix to generate a recovery in earnings in 2006 and beyond," John Sheehan, an analyst at NCB said in a note to investors. "The group has failed to capitalise on the Irish growth opportunity in recent years but better pricing and tighter cost control should see steady recovery.

At the end of June, Readymix had net cash of €7.5 million and it expects to receive a further €23 million later this month from the sale of its East Wall Road site.

Mr Gonzalez said the majority of the cash will be spent modernising the aggregates business. He also said the group was currently considering three north Dublin sites for the new cement factory and would make a decision as soon as possible.

Readymix is constantly on the look out for other locations to buy in return for selling some of its more valuable land, which are currently home to old-fashioned cement factories. One particular site at Blackrock is likely to hold substantial value, according to Mr Gonzalez.

The group's pension fund deficit almost halved in the six-month period to €6 million, a decrease the company attributed to higher interest rates and the fact that it had topped up the fund itself.

Readymix will pay an interim dividend of 1.65 cents a share, unchanged from the prior year.