'Brexit vote to hit European building materials firms in UK' - Moody's

By Georgina Prodhan

FRANKFURT, July 5 (Reuters) - Britain's vote to leave the European Union will hurt the earnings of European building materials firms' UK operations, Moody's said a day after a report that Britain's construction industry suffered its worst contraction in seven years.

The credit ratings agency said French building materials group Saint-Gobain and Austria's Wienerberger , the world's biggest brickmaker, were likely to feel an immediate impact from falling house prices as the most exposed to the British residential market.

Cement and aggregate producers HeidelbergCement (LSE: 0MG2.L - news) , CRH (EUREX: 558474.EX - news) and LafargeHolcim (LSE: 0QKY.L - news) , whose infrastructure and commercial construction projects typically run for a year or more, faced longer-term challenges, Moody's said.

Worries about the economic impact of leaving the European Union hit Britain's property market and sent the pound to new 31-year lows on Tuesday, while Conservative lawmakers began voting for a new prime minister following David Cameron's resignation.

Investors sold out of a range of stocks connected to the industry, including property firms, listed real estate investment trusts, asset managers and insurers, and two British commercial property funds suspended trading.

The European construction and materials index fell 2.1 percent, with Wienerberger (LSE: 0MKZ.L - news) down 4.5 percent, Saint-Gobain down 2.5 percent and CRH down 3.2 percent.

Financial data company Markit (NasdaqGS: MRKT - news) said on Monday its construction Purchasing Managers' Index plunged to 46.0 in June from 51.2 in May, its lowest level since June 2009, in what could be a sign of worse to come.

It (Other OTC: ITGL - news) was the first time since April 2013 the index had fallen below the 50 level that separates contraction from expansion.

However, Moody's said the hit to the earnings of the five European building materials companies, who all generate roughly 10 percent of their profits in Britain, was not likely to be enough to affect their credit ratings.

It added that their currency exposure was mostly related to the conversion of profits in pounds to euros or Swiss francs, with most production being local, using UK-sourced raw materials.

Kepler Cheuvreux equity analysts also pointed to Wienerberger and CRH in a note last week as having material exposure to Britain, along with Dutch firm BAM, Spain's Ferrovial (Other OTC: FRRVF - news) and Swiss company Zehnder.

Deutsche Bank (LSE: 0H7D.L - news) analysts, in a note on Monday, made minor changes to target prices for European building and construction firms, but said longer-term global growth prospects and currency moves were more of a concern than the immediate effect on earnings from a UK slowdown.

"Without glimpses of macro support, it is hard to see the performance of share prices in the sector being much better than lacklustre," they wrote. (Additional reporting by Lina Saigol; Editing by Greg Mahlich)