CRH sticks to earnings above €3bn despite sterling woes

Building materials giant CRH has said it continues to expect earnings to reach a record of more than €3 billion even as a sterling slump weighs.

Chief financial officer Senan Murphy told analysts on a conference call that the group was factoring in currency "headwinds" of between €80 million and €90 million, driven by sterling weakness as well a depreciation of the Canadian dollar and Philippine peso this year against the euro.

In a trading update it said sales for the first nine months of the year rose 6 per cent to €20.4 billion, although growth in the Americas slowed to 1 per cent in the third quarter from 13 per cent in the first half when a lot of projects were pulled forward because of favourable weather conditions.

Sales growth in Europe rose to 4 per cent in the third quarter from 3 per cent in the first half following years of stagnation. Chief executive officer Albert Manifold said the group was now beginning to push through price increases for cement in Europe.

Nine-year high

Shares in CRH reached a nine-year high last week of €32.50, valuing the group at more than €27 billion, after

Donald Trump

won the US presidential election. Analysts from

Merrion Capital

to

Barclays

Bank concluded that its US building materials unit was best placed to benefit from highway spending under the Republican’s $550 billion (€513bn) infrastructure plan.

However, the shares have since pulled back as investors considered the challenges Mr Trump faces getting his programme over the line in Congress.

Mr Manifold played down the impact of Mr Trump’s victory. “The election was only nine days ago. The administration is not even in place.”

However, he said the group had taken more comfort from the fact that voters across 22 US states last week approved additional infrastructure funding for state and local transportation projects. The American Road & Transportation Builders Association estimates the new measures amount to $201 billion.

Competition authorities

Last year CRH carried out a transformational €6.4 billion purchase of assets offloaded by European rivals

Lafarge

and

Holcim

to appease competition authorities as part of their merger. It also acquired CR Laurence, North America’s leading maker and distributor of products for the professional glazing industry, for $1.3 billion.

Ebitda for the first nine months of the year rose 14 per cent to €2.4 billion on a pro-forma basis, which includes the pre-acquisition trading of businesses bought last year.

Goodbody Stockbrokers analyst Robert Eason said that while his €3.2 billion full-year Ebitda forecast for CRH may now be too optimistic, “the group is well placed to benefit from continued growth in the US and for cash-generation to remain robust”.

The group, which is focused this year on cutting its net debt by more than 9 per cent to below €6 billion, has the capacity to spend between €1.5 billion and €2 billion on deals over the next 12 to 18 months.

“We do have a healthy pipeline of deals,” said Mr Murphy, adding that the group had not been particularly put off by an increase in asset values in the US since Mr Trump’s election. “We’re not going to find ourselves in a position where we’re overpaying for deals.”