CRH profits surge 31% on strength of US operations

A big boost in profits from CRH's operations in the US led to a 31 per cent surge in pre-tax profit to £85.2 million in the first half of 1998. There was also growth, but at a lesser rate, in Ireland, Britain and mainland Europe. The better-than-expected results benefited to the tune of £2 million from favourable currency exchange translation and about £6 million from acquisitions. Nevertheless, the core growth has been substantial. Reflecting real growth, earnings per share have risen by 27 per cent to 16.7p and shareholders are to benefit with a rise in the interim dividend from 3.45p to 4p.

The building products group remains in a strong financial position. Net debt rose from £421.5 million to £443.8 million, giving it a comfortable gearing of 39.2 per cent.

It remains a strong cash-flow generator with some £146.5 million from operations, but this was more than absorbed by capital expenditure of £80.8 million and acquisitions and investment of £94.2 million. Cashflow per share grew by 27.4 per cent to 32.65p.

Group sale rose by 27 per cent to £1.8 billion and profit margins widened marginally from 4.6 per cent to 4.7 per cent. Operations in all the main geographical areas showed growth in sales and profits. Sales in the Republic rose from £182.4 million to £195.8 million while trading profits grew from £29.7 million to £31.8 million.

CRH said there was strong demand from the roads sector together with further good growth in cement and concrete products. The new grate cooler at the Platin cement plant was successfully commissioned but the disruption led to lower profits from Irish Cement. This, however, was more than made up by a strong increase in profits from Roadstone-Wood. Sales in Britain and Northern Ireland increased from £250.8 million to £302 million while trading profit rose from £10 million to £13.7 million. The group benefited from a mild winter in Britain, but in common with other building products groups, it experienced weaker demand in the second quarter.

The Keyline subsidiary had better margins and the Forticrete group had better results. Combat Polystyrene "continued to perform well", CRH said. In Northern Ireland, the TBF Thompson group had similar results "in difficult markets".

Sales in mainland Europe increased from £380.5 million to £430.3 million but trading profit only showed a marginal rise from £25.5 million to £26.4 million. The real underlying growth, however, was better as the first half of last year had the benefit of an exceptional item of £1.8 million.

A good performance by its manufacturing businesses in the Benelux "was tempered by store reformatting expenditure in our distribution activities". Garden products were affected by wet weather in the second quarter. Spain showed a good recovery. And there was an improved contribution from Germany and France despite difficult market conditions. There was a lower contribution from the Polish venture.

Operations in the Americas had the best performance with a rise in sales from £605.9 million to £878.2 million and a more than doubling of trading profit from £14.2 million to £29.8 million. This, chief executive, Mr Don Godson, said, reflected particularly strong performances from the architectural products and materials groups.