Cost overruns weigh on Severfield-Rowen Shares in Severfield-Rowen fell 7 per cent as the UK-based steel supplier issued a profit warning following cost overruns on two British projects. The company, which has supplied steel for some of London's new skyscrapers such as the Shard, said cost overruns of £1.6m meant that pre-tax profits in the six months to June were now likely to come in at about £1.5m. In the same period a year earlier, the company earned £3.4m. The overruns occurred on two unconnected projects in the UK, one substantially larger than the other, and were the result of underestimates of the time that complex steel structures would take to make and install. Severfield-Rowen declined to identify the projects involved, however, both are expected to be finished on time. Dominic Convey, an analyst at Peel Hunt, said that although the losses were not large, they were still likely to put pressure on the company's share price in the coming weeks. "Overruns of £1.6m are not huge in the context of company with revenues of £300m, but margins have been pretty tight over the last couple of years, which means that even small setbacks attract more attention, and events like this are also a reminder of the execution risk inherent in contracts of this nature," he said. Despite the setback, the company still expects profits for the full year to be higher than in 2011, helped by "a strong order book, anticipated full capacity utilisation and good project mix in both the UK and India." As last year's underlying pre-tax profits were £10.1m, that would imply second half profits this year would need to be about 30 per cent ahead of the £6.7m achieved over the same period in 2011. Jeremy Browne, an analyst at Fairfax IS said that that was a "big ask," given the deteriorating economic climate in the UK, which provides the bulk of Severfield-Rowen's revenues. "Second half progression will depend on the timing and phasing of their UK contracts, whether they have some better margin contracts coming through, and how the joint venture in India fares," he said. In the medium term, the big swing factor is the UK. Until the oversupply problem in structural steel is dealt with, it will be difficult for them to make much progress. Mr Browne said he had reduced his full-year 2012 profit forecasts 22 per cent since March. Shares in the company, down about a third in the year to date, fell 7 per cent to 152.75p on Monday.