CRH cuts management salaries by 25% and temporarily lays off 12,000

Building materials giant CRH has cut management salaries and board fees by 25 per cent and temporarily laid off about 12,000 workers as the construction industry suffers a severe hit across Europe and North America amid the coronavirus pandemic.

But the company is sticking to plans to pay a final dividend of almost €494 million on last year’s earnings, highlighting in a trading statement that it has a strong balance sheet with over $6 billion (€5.53 billion) of cash and cash equivalents. This has been boosted by a recent decision to draw down a €3.5 billion revolving credit facility.

In North America, while emergency restrictions have been implemented in all US states, construction has to date been deemed an “essential activity” in most markets and is permitted to continue, provided appropriate safety measures are implemented.

CRH's businesses in Pennsylvania, New York City and Washington state have been the most affected to date, it said.

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The company has also experienced significantly lower activity levels in Ontario and Quebec as a result of government restrictions on construction in both markets. Business levels are currently running at 80-85 per cent of normal levels in North America, chief executive Albert Manifold said on a call with analysts.

“Nevertheless, healthy backlogs and a favourable bidding environment continue to provide support for our business, and although the situation remains fluid, we are starting to see early indications of restrictions being eased across a number of markets,” the group said in the trading update, on the eve of its annual general meeting.

Business in Europe has been more heavily affected, with nationwide shutdowns being implemented across a number of markets. The UK is running at 40 per cent of normal levels, France and Spain at 30 per cent, and the Republic at 20 per cent, Mr Manifold said. Central and Eastern European businesses have been less affected.

Most of the 12,000 temporary layoffs, accounting for up to 15 per cent of its workforce, have been in Europe as 600 of the group’s plants and sites are closed globally, Mr Manifold told The Irish Times. The group has a total of 3,100 locations.

He declined to give a breakdown for Ireland, where the company has about 1,700 employees.

Spending

CRH said that it has suspended all non-essential and discretionary spending, with its share buyback programme, which has resulted in €1.8 billion being spent repurchasing its own shares over the past two years, on hold until further notice.

“Due to the unprecedented level of volatility in our markets and the uncertainty surrounding the extent and duration of government restrictions that are currently being implemented, the impact on CRH’s profitability in 2020 cannot be reasonably estimated at this time,” CRH said.

The construction industry is lobbying authorities on both sides of the Atlantic on how it should be among the initial beneficiaries as Covid-19 restriction are eased. “We’re working with authorities towards moving to back-to-work protocols. I’d expect by mid- to end-May, most markets will be back to some level of activity,” he said.

Still, he said that it is important to move “very carefully” in relaxing restrictions to avoid risks of secondary spikes in infections.

CRH, which spent about €3 billion on bolt-on acquisitions through the 2008-13 financial crisis years, expects to see smaller “mom and pop” opportunities cropping up as economies begin to recover from the pandemic, Mr Manifold said, adding that large deals are off the agenda.

Sales across the group rose by 3 per cent on a like-for-like basis in the first quarter, in spite of Covid-19 causing significant disruption across many of its markets since the middle of March.

“In these unprecedented times, financial strength and management experience matter – not just to survival but to growth,” said Davy analyst Robert Gardiner. “Its management team successfully led the business through the last crisis, positioning it to take advantage of multiple growth opportunities over the past five years. This cycle could present the company with similar opportunities.”

Shares in CRH rose 7.1 per cent to €26.10 in Dublin following the update. CRH’s annual general meeting on Thursday is taking place against strict restrictions that will see only a minimum number of shareholders attend to establish a necessary quorum.