First-half profits at CRH set to fall

FIRST-HALF profits at building materials giant, Cement Roadstone Holdings (CRH), are set to fall but the group believes the US government’s $27 billion stimulus plan will ease the recession’s impact in the second half.

The company told shareholders at its annual general meeting (agm) in Dublin yesterday that trading in the first four months of 2009 was “extremely challenging”.

“As a result the normal seasonal second quarter pick-up has to date not been as strong as expected and the profit outcome for the first half of this year will show a sharper decline than that previously expected,” CRH warned.

But its statement added that stabilised energy costs combined with the benefits that the US stimulus package could deliver should improve performance in the generally more profitable second half of the year.

US president Barack Obama’s administration earlier this year announced spending plans aimed at boosting the US economy, which included $27.5 billion to build and redevelop infrastructure. The US generates around half CRH’s $20 billion revenues. Speaking after yesterday’s agm, CRH chief executive, Myles Lee, said that the group has seen indications the US stimulus plan is working.

He pointed out that the federal government is putting pressure on individual states to begin work on projects that qualify for funding under the plan.

“We’re seeing the impact of that, particularly in the northeast, in states such as New Hampshire and Vermont,” Mr Lee said. He added that departments of transport in other states were beginning “to push out” their projects.

Mr Lee pointed out that many of the projects involved road resurfacing, which he said are a quick way of creating jobs. Road resurfacing largely involves the use of asphalt and quarried stone (known in the trade as aggregates).

Through its ownership of Apac, CRH is one of the biggest suppliers of asphalt in the US. However, Mr Lee stressed that the first four months of the year are generally the quietest period for the group’s US businesses, and usually account for 5 per cent of revenues.

He explained that the busiest period runs from May through to October.

He also pointed out that the company will only start to see real benefits from the stimulus plan in the second half of this year and throughout 2010, as individual states begin to increase spending and the number of projects gathers momentum.

Earlier this year, CRH raised €1.24 billion from shareholders through a rights issue, which it said it plans to use to buy smaller rivals which are likely to be put up for sale at attractive prices.

The group believes that current market conditions, combined with the fact that large numbers of players in its business borrowed to fund expansion, will force their owners to put them on the market.

Mr Lee told The Irish Timesyesterday that the company had no particular targets, but added it is "waiting and watching" for the right opportunities.