Tuesday 28 March 2017

CRH unveils plan to set aside €2.6bn to 'normalise' debt

Cement maker will use cash flows and money from divestments

CRH also spent €6.5bn on buying assets arising out of the Lafarge Holcim merger, and estimates its debt after the transactions to be around €8.6bn
CRH also spent €6.5bn on buying assets arising out of the Lafarge Holcim merger, and estimates its debt after the transactions to be around €8.6bn
Gavin McLoughlin

Gavin McLoughlin

Ireland's biggest listed company CRH will set aside €2.6bn to get its debt down between now and the end of its next financial year.

The cement maker has embarked on an aggressive acquisitions strategy in recent times and on Thursday said it had agreed to buy US glazing components company CR Laurence for $1.3bn.

It said the business would be bought debt free and that the money would come from the company's existing financial resources.

CRH also spent €6.5bn on buying assets arising out of the Lafarge Holcim merger, and estimates its debt after the transactions to be around €8.6bn. It wants to reduce that to €6bn by the end of 2016.

"We continue to maintain our focus on prudent financial management and we remain committed to restoring our credit metrics to normalised levels in 2016," the company said.

Around €1.5bn of the money used to pay off debt will come from proceeds of the company's ongoing asset sale program, which is over halfway completed, and around €1bn will come from its cash flow.

On Thursday Davy analysts Barry Dixon and Robert Gardiner said CRH represented the "most compelling" stock in its sector.

The move to pay down debt "reflects the impact of the cash-generative nature of the business model and CRH's ongoing focus on portfolio review," Dixon and Gardiner said.

"Based on the strong underlying performance in H1, we expect to increase our full-year EBITDA (earnings before interest, taxes, depreciation and amortisation) forecasts by 4pc to 5pc".

Goodbody's Robert Eason said analysts there believed the results were "solid" with CRH outperforming market expectations.

The company also announced on Thursday that its first-half revenue rose 13pc to €9.4bn, fuelled by a 26pc rise in the Americas. Operating profits rose to €189m from €171m.

Chief executive Albert Manifold said CRH is on the cusp a "very significant growth period" and will benefit from an improvement in US construction activity that could last a decade.

But he said Europe is mixed and that the company CRH has "been to hell and back" in Europe over the past few years of economic turbulence.

Manifold said the company CRH will be "very selective" regarding bolt-ons in the next couple of years but will begin targeting larger acquisitions by 2017 or 2018.

He added that the company is interested in Australia and New Zealand. He said business is picking up in Ireland but that the Government will need to invest in infrastructure to incentivise more foreign direct investment.

"Off horrendous lows, we're seeing good growth in the Irish construction industry this year," said Mr Manifold. But he added that the recovery appears to be largely Dublin-centric.

"You only have to go 20 miles down the road to get a real sense of how tough it is in the construction sector and how tough it is in the economy in Ireland.

"That's where infrastructure becomes crucial - infrastructure to get products and goods in and out of the country, and to get people in and out and around the country.

"We have a lot of advantages going for us. But what we have to do is provide the competitive infrastructure and resources to encourage people to come in and invest in our country.

"What I'd like to see is more infrastructure spend to have a more even spread around the country."

Sunday Indo Business

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