Sunday 4 December 2016

Davy upgrades CRH on back of improved outlook

Published 11/01/2011 | 05:00

Davy Stockbrokers has upped its forecasts for building materials giant CRH on the back of what it says are better expectations for the company's operations in Poland, as well as its Americas Materials division.

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Analyst Barry Dixon at Davy boosted his forecast earnings per share (EPS) at CRH by 7pc to 88.8 cent for 2011, and by 7pc for 2012 to 103.8 cent.

He said that 2010 "looks increasingly" like a trough for earnings at the group, which in August stunned investors with a profit warning that battered its share price.

Mr Dixon said that he had previously forecast a slight decline in aggregates and asphalt prices in the US during 2011, but said that the assumption now appeared to be too pessimistic.

He's now pencilling in a 2pc rise in such prices this year in the US.

CRH will have generated about half its earnings in the US during 2010, where it's heavily involved in highway construction. Its US materials division is the single most important unit for CRH.

Mr Dixon said he estimates that every 1pc rise in the price of aggregates adds about 0.5 cent to CRH's earnings per share figure, while every 1pc increase in asphalt prices adds 1.5 cent, assuming unchanged input costs.

He added that Polish cement demand recovered strongly in the second half of 2010, with volumes in the five months to last November up 8pc on the corresponding period in 2009.

Demand is being driven by a combination of the availability of EU structural funds and the building of infrastructure in advance of the 2012 European football championships to be held in the country.

CRH is the third-largest cement producer in Poland after rivals Heidelberg Cement and Lafarge.

Mr Dixon said that recovery for CRH in 2011 was likely to be "relatively subdued".

However, with the improvement in profits being driven by a combination of the full-year impact of €1.8bn in cost-cutting measures implemented over the past three years by CRH, and the absence of restructuring costs that amounted to €100m last year, he reckoned 2013 EPS could reach 122 cent.

Shares in CRH closed up 1.3pc in Dublin at €14.49.

Irish Independent

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