Cathal

Building materials group’s sales in its first quarter rise 9% on year

CRH, Ireland’s largest publicly-quoted company, said it sees its first-half operating earnings to grow to nearly €1 billion following a “positive trading backdrop” in its main markets in the first three months of the year.

The building materials giant’s earnings projection would represent “mid-single digit percentage growth” compared to same period in 2015 on a pro-forma basis, which is adjusted for sales and acquisitions during the year.

The forecast is ahead of analysts’ expectations, with the consensus view calling for earnings before interest, tax, depreciation and amortisation (ebitda) of €911 million. Shares in the group rose as much as 1.4 percent in early trading in Dublin, to €26.23.

Last year was transformational for CRH as it acquired €6.5 billion of assets offloaded by European cement giant LafargeHolcim to appease competition authorities. CRH subsequently sold €1 billion of assets last year as it digested the hugh deal. It raised a further €78 million from divesting unwanted assets in the first quarter of this year, although this was offset by €85 million of spend on small-scale acquisitions and investments.

While CRH is reportedly in the race to acquire a $1.5 billion (€1.3 billion) Indian cement business currently up for sale by LafargeHolcim, chief executiveAlbert Manifold played down the Irish group’s interest in large purchases.

“I’m always interested to open the paper and see what businesses we’re bidding on — people are trying to talk up competition on deals… we’re probably in 10 per cent of the stuff we’re associated with,” Mr Manifold said on a call with analysts on Wednesday.

“This is the year for delivery for CRH: delivery on earnings, delivery on cash and delivery on deleveraging,” he said.

Still, he said the Dublin-based company would be interested in US and Belgian assets that German rival HeidelbergCement is seen selling as a result of its planned takeover of Italy’s Italcementi.

In the first quarter, CRH’s group sales rose by 9 per cent on the back of “continued positive momentum in the Americas” and further stabilisation across Europe, a trend that had begun in late 2015.

In the seasonally more significant second half of the year, CRH expects its ebitda to “make progress” as a US construction demand continues to grow at a modest pace and the European market remains “broadly stable.”

“CRH’s positive trading update points to ongoing momentum in its Americas markets with Europe also showing signs of recovery,” said Robert Gardiner, an analyst with stockbrokers Davy in Dublin.

While CRH’s shares are trading in line with peers “we belive that the quality of its earnings, combined with the potential for positive earnings revisions, justifies a premium rating — which makes it our top pick in the sector,” he said, reitering his “outperform” rating on the stock.

April 27, 2016
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