CRH forecasts record full-year earnings above €3.2bn

Building materials giant CRH expects to report record full-year earnings in excess of €3.2 billion after reporting 2 per cent growth in the first nine months of the year. Hurricanes and weakness in the group's Asian business failed to take the shine off strength in the Americas and Europe.

The projection, contained in a trading update from the group on Tuesday, compares with its earnings before interest, tax, depreciation and amortisation of €3.13 billion posted in 2016.

While Goodbody Stockbrokers analyst David O’Brien noted the full-year forecast is shy of the €3.3 billion consensus figure among analysts, he said estimates for next year would likely increase “materially” after the group returned to the acquisitions trail this year.

"Third-quarter trading benefited from continued underlying growth in the Americas, although some operations were impacted by adverse weather and hurricane activity," CRH said in a trading update on Tuesday. "Momentum remained positive in Europe, while, in Asia, very competitive market conditions continued."

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Group sales grew by 2 per cent during the first nine months, with Europe and the Americas increasing at the same pace. However, turnover in Asia dropped 9 per cent, mainly reflecting the Philippines market, which has been flooded by cheap cement imports in recent times.

Investment transactions

CRH has ratcheted up deal-making after pausing in 2016 to reduce its debt burden and absorb a record €8 billion of purchases carried out in 2015. This included €6.5 billion of assets bought from European rivals Lafarge and Holcim under disposals agreed with competition authorities as part of their own merger.

The group has spent €1.34 billion on 27 purchases and investment transactions so far this year, while receiving €165 million in proceeds from the sale of unwanted assets.

Last month, CRH's $3.5 billion (€3 billion) offer for Kansas-based Ash Grove Cement was accepted by the US group's shareholders, while it disclosed on Tuesday that it had agreed to buy a Florida cement business for $750 million.

Ireland’s largest publicly-quoted company, led by chief executive Albert Manifold, indicated on a conference call that it expected to deliver more than $100 million in synergies and savings from the US deals.

Meanwhile, it emerged last week CRH had registered an interest in bidding for South Africa's Pretoria Portland Cement, putting itself at the centre of a potential bidding war for a business with a market value of the equivalent of about €600 million. Canadian investment Fairfax and LafargeHolcim are also circling the business.

The group also entered a deal in late August to sell its US distribution arm, Allied Building Products, for $2.6 billion.

CRH’s drive to sell off unwanted businesses hit a bump last week when German competition authorities blocked its planned disposal of a cement plant and grinding station in eastern Germany to Schenk, based in Ulm in southern Germany, for an enterprise value of €349 million. Mr Manifold said CRH was looking at alternative options, including keeping the business “for the longer term”.

He also said the company was “looking at every nickel” it planned to invest in the Philippines, a market it entered in 2015 with the purchase of LafargeHolcim assets, which has proven to be more challenging than expected. CRH previously said it planned to invest €300 million in the country.

Shares in CRH moved between negative and positive territory in trading in Dublin on Tuesday as investors digested the results and outlook.