CRH extends share buybacks since 2018 to €3.2bn

Total equates to 10% of company’s current market value

CRH confirmed that it had spent about $300 million acquiring 6.1 million of its shares between Christmas Eve and Wednesday. Photograph: iStock

CRH has allocated a further $300 million (€271.7 million) to buy back shares over the coming months, which will bring the amount returned to shareholders through stock repurchases since May 2018 to $3.5 billion (€3.17 billion).

The building materials giant announced the extension of its bond-buying programme on Thursday as it confirmed that it had spent about $300 million acquiring 6.1 million of its shares between Christmas Eve and Wednesday.

“Any decision in relation to any future buyback programmes will be based on an ongoing assessment of the capital needs of the business and general market conditions,” it said. The company had suspended stock repurchases for a period during the worst of the Covid-19 crisis.

The total of $3.5 billion that will have been spent on buybacks over four years to the end of June equates to about 10 per cent of CRH’s current market value, Goodbody Stockbrokers analyst David O’Brien said in a note.

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“The level of shareholder returns has been achieved all while still allocating capital to both organic and inorganic growth opportunities which leaves CRH well placed to take advantage of the attractive market backdrop over the medium term,” said Mr O’Brien. “CRH has now been trending at circa $1.2 billion of buyback per annum.”

Inorganic growth is a phrase used to refer to expansion through acquisition.

North American unit

Cantor Fitzgerald Ireland analyst Ian Hunter told clients in a note on Wednesday that CRH may be left with the firepower to spend more than $12 billion on deals after the completion of the recently-agreed sale of its North American glass building products unit, Oldcastle Building Envelope.

The receipt of $3.45 billion of cash from the deal in the middle of this year, together with an estimated $2.65 billion of operating cash flow that CRH will generate this year, after capital expenditure, will see the building materials giant’s net debt falling to $1.23 billion by the end of 2022, Mr Hunter said.

That would push the group's net debt down to 0.2 times earnings before interest, tax, deprecation and amortisation (ebitda). That is a 10th of the two-times leverage ratio that CRH's new chief financial officer, Jim Mintern, has said the group would be "quite comfortable" with.

Still, CRH has a track record of carefully weighing the benefits of spending money on acquisitions against returning capital to shareholders.

Chief executive Albert Manifold has committed the equivalent of $17.7 billion to acquisitions since he took charge of CRH eight years ago, including $1.5 billion spent on 20 deals last year.

However, he has raised $8.5 billion over the same period selling businesses that were no longer delivering the required returns or growth potential, or otherwise not justifying continued existence within the group. The figure will reach $12.3 billion after the disposal of the Oldcastle Building Envelope unit is completed.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times