CRH shares hit new high on €4.15bn earnings forecast

Shares in CRH soared to an all-time high on Tuesday as the building materials giant forecast 23 per cent full-year earnings growth after it posted a robust set of interim figures and signalled that a weak UK market had "hit a floor".

The company’s stock jumped as much as 2.7 per cent during trading in Dublin to €35, pushing its stock market value to €27.7 billion.

Earnings before interest, tax, depreciation and amortisation (Ebitda) increased by 27 per cent in the nine months to €3.2 billion, buoyed by the impact of acquisitions, including the €3 billion purchase in the middle of last year of US cement company Ash Grove. The group sees its Ebitda rising to a record €4.15 billion for the full year.

Earnings in the Americas materials division, a supplier of aggregates, asphalt and cement, soared 9 per cent for the first nine months, while the result for Europe materials increased by 2 per cent.

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Davy analyst Robert Gardiner said that weakness in the UK “masked” a solid performance by the wider European business.

“In the UK, aggregates, cement and asphalt volumes fell, while favourable prices were not enough to offset cost inflation,” said Mr Gardiner. “All other regions posted higher selling prices, with solid demand growth in France, Germany, Ireland, Poland and southeastern Europe.”

CRH group chief executive Albert Manifold told analysts on a conference call that his team believed that the UK market had “hit a floor at this stage”. CRH had warned in August that its UK infrastructure business was experiencing a “marked slowdown”.

CRH said on Tuesday that it has spent a further €700 million on deals this year, and raised €2 billion from asset sales, mainly comprised of the disposal of its European distribution business.

Cement unit

The company is also reportedly considering the sale of its Philippines cement unit which it inherited in 2015 as part of its purchase of €6.5 billion of assets from European rivals Lafarge ad Holcim as they completed their own merger. The Philippines business had been loss-making for much of its time under CRH, but has stabilised in the past 12 months.

Mr Manifold declined to comment on the prospect of a sale of the unit on the analysts call. He said that “continued portfolio refinement and disposals” were now an “embedded part” of the group.

While CRH has spent almost €14 billion on acquisitions since Mr Manifold took charge of the group in 2014, the chief executive has also raised more than €7.5 billion over the period by selling underperforming and unwanted assets.

CRH said its earnings growth in the third quarter was helped by more favourable weather conditions than experienced in the first half of the year in North America, with group sales rising 9 per cent to €21.8 billion for the period as a whole.

The group reiterated that its net debt is expected to be close to €7 billion at the year-end, leaving its borrowings at “well below” two times ebitda.