CRH shares rise 4.4pc to hit €14.46
Company reaffirms €1.6bn earnings guidance and says it has stemmed decline in both sales and earnings
SHARES in global building materials giant CRH rose 4.4pc to €14.46 in Dublin yesterday as it reaffirmed its €1.6bn earnings guidance for the year and said declines in sales and earnings had been stemmed.
Like-for-like sales declined by 4pc in the third quarter, bringing the year-to-date fall to 8pc -- better than the 10pc decline in the first half. The third quarter is traditionally CRH's most profitable of the year.
Third-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) fell almost 7pc to €750m. CRH is expecting fourth-quarter EBITDA to be unchanged from last year's at €400m.
The jump in the share price follows weeks of pressure on the stock after the company issued a profit warning in August and suffered from the side-effects of poor US economic data.
Speaking to investors yesterday, chief executive Myles Lee confirmed the €1.6bn EBITDA target for the current year.
He said the group hoped to build a €2bn turnover business in Germany after it paid €100m for virtually all the remainder of Hanover-based distributor Bauking, which operates 130 branches.
"If we include Bauking with our already wholly owned sanitary, heating and plumbing distribution business in northern Germany, we'll now have majority control of approximately €850m of turnover in distribution in Germany in a fragmented market," said Mr Lee, "with a significant opportunity to build it to a €2bn-plus business over time."
CRH also owns various product-related firms in Germany with combined annual sales of just over €500m.
Mr Lee added that in the wake of the Bauking deal, Germany will become CRH's fourth largest market in terms of revenue, after countries including the US and the Netherlands.
He was cagey on prospects within the US next year, particularly in relation to highway programmes. The bidding process for projects doesn't get under way until next March and it is expected that there will be little clarity until then.
Just under half of CRH's EBITDA will be generated in the Americas this year, while its materials division there -- which includes aggregates and asphalt -- has been one of the group's hardest-hit divisions.
Mr Lee added that cost savings targets for 2011 would be raised by €90m to €455m, split equally between the US and Europe.
No decision has yet been taken on a final dividend for shareholders. He said: "That decision will be made in the context of our strong record and the fact that a dividend is a major element in CRH's offering to shareholders."
Mr Lee admitted that conditions in Ireland remain difficult. Pointing out that the company expects volume declines here in the order of 20pc for the year, he added: "It remains a very difficult construction market. Pricing remains tough and very competitive, particularly in downstream products."