European division drives CRH results ahead of forecast

CRH POSTED first half results ahead of forecasts yesterday, driven by a strong performance from its European division, but warned it would not reach analysts’ expectations for earnings growth this year.

Despite its muted comments on outlook – due mainly to concerns about the global economy and the difficulty in translating higher input costs into higher prices in the first-half – the world’s second largest building materials company posted a 280 per cent rise in profit for the first half of 2011.

Pretax profits increased to €95 million, up from €25 million in the same period last year. Earnings before interest, tax, depreciation and amortisation (ebitda) rose 10 per cent to €574 million, while revenues grew to €8.1 billion, up from €7.6 billion, representing a seven per cent jump, or 5 per cent in terms of underlying growth, excluding currency fluctuations.

A strong performance by the company’s European businesses was the primary driver of growth in the first half, with the company’s European products and distribution businesses experiencing an increase in operating profits of 50 and 79 per cent respectively.

Operating profit at its European materials division dropped 7 per cent, however, as it struggled to push through price increases to recover higher input costs.

A strong performance in countries such as Switzerland, Finland and the Netherlands offset the continuing decline in activity in Ireland and other euro zone peripheral countries, including Portugal.

While results for its US business, which accounts for almost half of the company’s turnover, were ahead in dollar terms, ebitda for the Americas region declined by 4 per cent after currency translation. This was driven in particular by the underperformance of its materials division, which, like its European counterpart, failed to recover increased input costs through higher prices, resulting in a 21 per cent drop in ebitda.

CRH’s chief operating officer Albert Manifold expressed confidence the company will recover the input costs through increased price, though probably not before next year. “Historically we have been successful in passing on price increases. We will get it back, it’s just a question of when.”

CRH made 21 acquisitions totalling €163 million in the first six months of the year, and since June has spent €217 million on seven further acquisitions, bringing the cumulative total spend in the year to date to €380 million.

Net debt at June 30th was €3.9 billion, €0.8 billion lower than for the same period last year, leaving a net debt to ebitda ratio of 2.4 compared to 2.8 in June 2010.

Since the end of June the company completed a new €1.5 billion syndicated five-year loan facility with 13 banks, cancelling €0.6 billion of shorter dated bank facilities. The company has €1.1 billion in cash and is leaving its dividend unchanged at 18.5 cent per share.

Chief executive Myles Lee said the company should have a better understanding of the full year guidance by mid-November, after the traditionally busy months of September and October.

CRH’s share price closed up just over 1 per cent at €12.30 in Dublin yesterday.