Friday 23 March 2018

CRH tells shareholders it sees signs of recovery in Europe

CRH chief executive Albert Manifold, whose company said group sales rose by 2.5pc in the first four months of the year
CRH chief executive Albert Manifold, whose company said group sales rose by 2.5pc in the first four months of the year
John Mulligan

John Mulligan

CRH expects the European market to improve during the second half of the year as quantitative easing and low interest rates, coupled with improving consumer sentiment, spur its business.

Ireland's biggest company also said it has sold close to €1bn worth of assets since last year - over €540m of them since the start of 2015.

That's part of a wider plan to dispose of assets that are no longer delivering the kind of returns demanded by the company.

CRH also said it expects to close a deal to buy €6.5bn worth of assets from Holcim and Lafarge by the middle of the year.

That transaction will extend CRH's footprint into countries such as the Philippines.

The company, headed by chief executive Albert Manifold, released a trading update in advance its annual general meeting in Dublin today.

It said that trading in the first four months of the year were in line with expectations.

Group sales in the period rose 2.5pc, with the performance largely driven by "continued positive momentum" in the Americas, where it said the economic and business environment remains "upbeat".

Sales in Europe declined by 2pc in the four-month period, while sales in the Americas were 8pc higher.

"In Europe, while prior year comparatives, which benefited from particularly mild weather conditions experienced in the first four months of 2014, were challenging, trends are improving across our main markets," it noted.

CRH said it expects group earnings before interest, tax, depreciation and amortisation (EBITDA) in the first half of the year to be nearly 10pc ahead of the first six months of 2014 on a constant currency basis.

The first half of the year is typically quieter for CRH given that construction activity ramps up in the spring in both the US and Europe.

In the first half of 2014, CRH posted EBITDA from continuing operations of €460m.

It predicted that first-half EBITDA in Europe will be slightly behind that generated in the first six months of 2014, but that in the Americans, EBITDA will be "well ahead".

It confirmed that an improving outlook in Europe will filter through to the business in the second half of this year.

"We expect improving consumer sentiment and favourable monetary policy in Europe to support further organic improvement across our main markets," it said.

"In the United States, we expect housing and non-residential construction to continue to improve in 2015, with infrastructure activity likely to remain broadly stable."

It added: "Against this backdrop, with the benefit of further cost savings measures and in the absence of any major financial or energy market dislocations, we expect second-half group EBITDA from continuing operations to be ahead of the corresponding period last year."

Davy Stockbrokers described the update from CRH as "positive".

"The potential for further improvement in continuing operations, combined with the contribution from the Lafarge-Holcim assets, underpins our view that CRH is the most attractive play in the European building materials sector," it said.

Last month, CRH announced that its financial director, Maeve Carton, will take on a new role next year as its transformation director. She'll be helping to integrate the Holcim-Lafarge assets being acquired by the company and identifying operational and financial savings.

CRH said yesterday that it is on track to deliver another €75m of cost savings this year.

"With a relentless focus on cost management, our cost reduction programme remains on track to deliver a further €75m of savings in 2015," it said.

The company said that will bring the cumulative savings generated between 2007 and 2015 to €2.6bn.

Shares in CRH were trading 1pc lower in Dublin by lunchtime yesterday, valuing the company at €20.2bn.

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