Move cements analysts' love affair with CRH

The love affair between CRH and the army of Irish and British financial analysts who cover the Irish building materials group is boundless. It's all well justified, say the analysts, and certainly it's difficult to argue with that given CRH's extraordinary record in recent years.

In that time, CRH has advanced from making a series of small to medium-sized acquisitions to large deals which have catapulted the group firmly into the premier division of European building materials group.

A few years ago, mentioning CRH in the same breath as the likes of Lararge, Heidelberger and Holderbank would have been over the top. Not so now, with CRH well justifying its place in that premier division.

Still, Current Account believes that analysts sometimes get carried away with their own hyperbole and there is a perfect example this week from a Merrill Lynch analyst fresh from his trip to see CRH's operations in Poland and eastern Europe.

"It never ceases to amaze us the sheer depth of quality that CRH finds, nurtures and sustains within its acquisitions," the Merrill analyst gushes.

Still, whatever about the hyperbole, there is no doubt that the boys in Belgard Castle have shown their adroitness at making earnings-enhancing acquisitions.

And certainly, the cost of entry into the Polish market now seems negligible given the growth prospects in Poland. Add in the Finncementti operations in eastern Europe, then the region will certainly be one of the areas for CRH in the years ahead.

According to the Merrill report, CRH is likely to increase its share of the Polish cement market from 20 per cent to 25 per cent in the longer term and will develop that a fully integrated cement/concrete/aggregates/concrete products business - very much on the lines of CRH's integrated operations in Ireland.

Merrill also expects CRH to link into a cement network that will extend eastwards into the Ukraine "where it has already acquired knock-down price assets" and beyond.

CRH's first venture into Poland was when it acquired the Ozarow cement works a few years ago and this is now being expanded to produce 8,000 tonnes of cement a day.

This makes the Ozarow kiln the largest of its kind in Europe and will add 650,000 tonnes of new capacity into a market growing at 5 per cent a year.

In its only cautionary word on CRH's Polish operations, Merrill says that to justify this expansion, CRH will have to gain market share very quickly.

But CRH has the option, however, of cutting production at its smaller and higher cost Rejowiec plant, if it finds itself with over-capacity.