Thursday 5 December 2019

CRH earnings forecast gets upgraded past €4bn

CRH chief executive Albert Manifold
CRH chief executive Albert Manifold
John Mulligan

John Mulligan

A pick-up in trading momentum and internal cost delivery has prompted Davy Stockbrokers to upgrade its earnings forecasts for building materials giant CRH.

In a third-quarter trading update last week, CRH said it was on track to deliver earnings this year of at least €4.15bn, including discontinued operations, which compares to €3.37bn in 2018. Its shares hit a 12-year high the day it released the update.

Davy pointed out yesterday in a report that CRH's update showed that organic earnings before interest, tax, depreciation and amortisation (ebitda) were 9pc higher year on year.

"We said more ahead as the group executes on its profit improvement plan in 2020 and 2021," said brokers at Davy.

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Davy said it expects CRH to deliver a 4pc increase in full-year sales for 2019, at €28.6bn, and for the group to post ebitda of €4.17bn.

In 2020, Davy said it expects Ireland's biggest company to see a 3.5pc increase in organic sales and a near 7pc organic increase in ebitda, to €4.27bn. That figure represents a 4pc upgrade to Davy's previous estimate.

CRH, led by chief executive Albert Manifold, said last week that in the nine months to the end of September, its revenue was 4pc higher on a like-for-like basis, at €21.8bn, while its ebitda was 7pc higher at €3.2bn on a like-for-like basis.

It said its operations in the US and Europe performed well in the third quarter.

Investors in CRH were not updated on reports that it has hired JPMorgan Chase to help it find a buyer for its cement business in the Philippines.

The unit has an estimated value of between $2bn and $3bn.

A disposal of the Philippines activities would come after CRH agreed in July to sell its European plumbing and heating distribution business to Blackstone for €1.64bn in cash.

CRH entered the Philippines in 2015 when it acquired Republic Cement, the second largest cement producer in the country.

The deal was part of a $7.2bn spree on assets that Holcim and Lafarge had to sell as part of their merger.

So far this year, CRH's building products division has completed 15 bolt-on acquisitions at a cost of €420m. One of its largest acquisitions was the purchase this month of US-based Torrent Resource for €100m.

The group's Americas Materials division has completed 20 bolt-on deals in 2019 at a cost of about €200m. Its Europe Materials unit has completed seven deals worth a total of €35m.

Irish Independent

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