Friday 20 September 2019

CRH on course to make record €3.2bn profit as it ramps up M&A

Under Albert Manifold CRH has expanded significantly in recent years
Under Albert Manifold CRH has expanded significantly in recent years
John Mulligan

John Mulligan

Building materials giant CRH - Ireland's biggest company - expects profits to hit a record €3.2bn this year as it benefits from underlying growth in the Americas and solid momentum in Europe.

Its sales in the first nine months of 2017 hit €20.7bn, up 2pc on the first nine months of 2016.

The company, which last month confirmed it will pay $3.5bn (€3bn) to buy US-based Ash Grove Cement, issued a trading update yesterday.

"We continue to expect another year of progress for the group," the company said in a statement. It added that if current momentum continues for the remainder of the year, earnings before interest, tax, depreciation and amortisation (ebitda), including discontinued operations, is expected to be more than €3.2bn. That compares with €3.13bn last year.

CRH, whose chief executive is Albert Manifold, has expanded significantly in the past few years even as it engaged in a sweeping asset disposal programme designed to weed out non-core businesses. In August, it agreed to sell its Americas distribution division for $2.6bn (€2.2bn) to Beacon Roofing Supply.

In 2015, it completed the €6.5bn acquisition of assets from rivals Lafarge and Holcim as the latter two firms merged.

The same year, it agreed to pay $1.3bn to buy a US glass firm.

So far this year, CRH has paid €1.34bn for 27 acquisitions or investment transactions, including deferred and contingent consideration in respect of prior year acquisitions. It has generated €165m in proceeds from the sale of assets.

Of the acquisitions so far this year, €690m was spent in the Americas, and €650m in Europe.

The deals included 11 bolt-on deals in the Americas that added about two billion tonnes of aggregates to CRH's reserves.

In Europe, CRH's biggest acquisition this year was completed last month, with the purchase of Fels, a large lime and aggregates business in Germany. CRH bought it for €600m from Xella International. Fels has one billion tonnes of limestone reserves. The company has 11 production locations, including nine in Germany.

CRH said the acquisition will provide a "strong platform" for future growth.

The acquisition of Ash Grove Cement, which is the fifth-largest cement maker in the United States, is expected to close next year.

CRH said it has also entered into an agreement to buy certain assets in Florida from Votorantim Cimentos North America, and Anderson Columbia. The assets of Suwannee America Cement include a one million tonne-capacity cement plant, 18 ready-mixed concrete plants and an aggregates quarry. The deal could reportedly value Suwannee at $750m.

Net debt at CRH is expected to be unchanged at the end of this year at €5.3bn.

In the Americas, CRH said that despite adverse weather and hurricane activity, its operations there benefited in the third quarter from continued stable market fundamentals in the United States. However, it noted input costs have risen.

In Europe, CRH said that it had experienced "solid underlying market activity" in the first nine months of the year, with like-for-like sales 2pc ahead of those in the first nine months of 2016. Ebitda in the period was 3pc higher year-on-year, it said. Full-year ebitda in Europe is likely to be 4pc ahead of the €1.1bn reported in 2016.

Irish Independent

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