Sunday 15 September 2019

Davy puzzled by CRH share fall as it backs a comeback

Savings: CRH, headed by CEO Albert Manifold, plans to cut €100m in structural costs
Savings: CRH, headed by CEO Albert Manifold, plans to cut €100m in structural costs
Ellie Donnelly

Ellie Donnelly

The 20pc decline in the share price of CRH this year "does not make sense" in the context of either the guidance that the company issued yesterday or its long-term strategic plans, according to Davy Stockbrokers.

"We do not believe that current valuation multiples adequately reflect the potential from CRH's self-help measures," said Davy analyst Robert Gardiner.

"That, combined with the group's financial strength, underpins our 'outperform' rating and 3700c price target."

The comments from Davy, which acts as CRH's corporate broker, come on the back of a trading update from the building materials group, in which it said it had identified €100m in structural cost savings.

The savings will come from overhead reductions, back-office rationalisation and the consolidation of certain regional support functions.

CRH, led by Albert Manifold, also announced phase three of its share-buyback programme. It started yesterday, and will end no later than December 31, during which time the group plans to repurchase ordinary shares for a maximum consideration of €100m.

Last month, CRH completed the second phase of its share-buyback programme, returning a further €350m in cash to shareholders.

This brings total cash returned to shareholders under the group's ongoing €1bn share buyback programme to approximately €700m.

Meanwhile, the company reported earnings before interest, taxation, depreciation and amortisation (ebitda) of €2.5bn for the nine months to September 30, an 8pc improvement on the same period last year, and a 2pc increase on a like-for-like basis.

Third-quarter sales rose 4pc year-on-year to €7.96bn, with ebitda up 3pc to €1.37bn in the three months.

In the Americas, the company reported continued underlying growth, despite adverse weather conditions in certain markets. Momentum remained positive in Europe, the group said.

In the group's European market, ebitda increased 2pc year-on-year in the nine-month period, while in the Americas, ebitda increased 3pc year-on-year.

However, in Asia, cumulative like-for-like ebitda for the division was 44pc behind, as pricing improvements were offset by higher fuel and power costs.

Full-year ebitda is expected to be approximately €3.35bn, up from the €3.15bn last year.

Irish Independent

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