CRH cites bad weather and strong euro for a weaker performance

Bad weather and a strengthening euro undermined the performance of CRH in the first six months of 2003.

Sales fell 3 per cent to €4.66 billion in the period, with pre-tax profits tumbling 18 per cent to €161 million. But the figures were fractionally better than the forecasts of analysts, who were forewarned of the impact of a poor winter and adverse currency movements in a trading statement issued by the group in June.

Chief executive Mr Liam O'Mahony said severe cold weather in the US and eastern Europe had affected sales and profits in the first three months of the year. A wet May and June had further hampered progress in the US.

Combined with the fall of the dollar and sterling against the euro - which knocked €10 million off the pre-tax profit figure - it was enough to more than offset the contribution of recent acquisitions.

Going forward, the firm expects the lower dollar to have a stronger impact in the second half, generally where CRH makes most of its profits. At current rates, chief financial officer Mr Harry Sheridan said foreign exchange translations would dent full-year pre-tax profits by €77 million. CRH shares closed 68 cents lower at €16.37 as the market focused on the currency effect.

CRH is confident that it will beat its performance in 2002 for the full year before the effect of the strong euro is factored in.

In the first half, a strong housing market and major infrastructure projects saw sales and operating profits in Ireland rise 14 per cent to €353 million and €68 million respectively.

But non-residential construction remains weak and the company says key infrastructural projects are now concluded, with materials demand from new jobs in this area unlikely to feed through until next year.

In Britain, profits were £3 million ahead in sterling terms with sales rising 12 per cent before the impact of the 9 per cent fall in the currency against the euro.

In the key US markets, sales slipped 17 per cent in the materials division and 10 per cent in the area of products and distribution, as severe weather slowed activity. Operating losses in materials rose 31 per cent to €39 million, while profits in products and distribution fell 30 per cent to €99 million.

The less significant distribution operation was the star performer in a poor period, delivering a robust underlying performance boosted by acquisitions.

In northern Europe, bad weather again hit sales, especially in Poland where business slowed dramatically early in the year. Its Finnish operation, too, suffered. Overall, sales fell 3 per cent in the materials sector to €444 million, with profits down 27 per cent to €33 million. Acquisitions in the products and distribution division offset lower organic sales and currency factors to add 19 per cent to overall sales of €1.116 billion and increase profits to €54 million, up 10 per cent.