Weak markets to hit CRH profits

Building materials giant CRH said this morning pretax profits this year “may show a high single digit percentage decline” on the weak dollar and weakening markets hit demand.

CRH shares fell 7.5 per cent in early Dublin trading to €16 by 8.38am.

In a trading statement CRH forecast pretax profits for the first half of €600 million, almost 10 per cent lower than the €670 million reported for the same period last year. In 2007 CRH reported a record profit of €1.9 billion.

The company estimates that dollar weakness could cost it €80 million in the full year, having already negatively impacted by €20 million in the first six months of the year. The company derives more than 40 per cent of its revenue from the US.

CRH said the "ongoing negative economic developments and financial market pressures of recent months are having an impact on business sentiment, leading to weaker demand."

Wet weather in the US during the last two months had affected trading at its Americas Materials division, the company added.

Operating profit in the Americas unit will fall from last year's €276 million, CRH said, to approximately €200 million this year, allowing for currency fluctuations.

During the first six months of the year CRH said it spent €0.7 billion on acquisitions and noted that work has begun on cement projects in Ireland, Poland and Ukraine and a joint venture factory in the US state of Florida.

In the Irish and Spanish materials market, CRH said the sharp fall in residential activity has been "outweighed" by the growth in infrastructure investment.

The company said its share buyback scheme which began at the start of the year has seen it purchase 14 million shares – equivalent to 2.6 per cent of ordinary shares – at an average price of €24. The buyback is limited to a maximum of 5 per cent of ordinary shares.

CRH has posted a profit for 16 consecutive years. However, the stock has fallen by a third this year and it has lost its title as the Iseq's largest stock by market value in recent weeks.

At €16 a share the company has a market value of €8.54 billion, according to Bloomberg data. CRH shares fell 7.4 per cent yesterday after analysts at Credit Suisse cut their price target on the stock

Finance director Myles Lee will replace Liam O'Mahony as chief executive officer at the end of the year.