CRH expects profits to reach €510m

CRH has enjoyed a good start to the year and expects to increase half-year pretax profits by about one-third to around €510 million, ahead of expectations, the company said.

"The current business outlook is, on the whole, positive and while, as always, risks remain we expect good profit growth in the more significant second half of the year leading to a healthy advance for 2006 as a whole," CRH said yesterday.

Shares in CRH added 1.5 per cent to €26.65 on the back of the positive trading update as analysts set about upgrading their full-year forecasts by about 2 to 3 per cent.

The building materials group said trading in the first four months had been favourable with a strong start from its US operations. "Through May and June, our American businesses have continued to perform strongly and, despite subdued trading in a number of major markets, our European operations have made progress."

CRH noted that the US economy and overall construction markets remained strong.

Although housing construction is moderating, it remains strong while non-residential construction continues to grow. Highway markets are robust, although the company expects some modest late-season volume impact as a result of higher product prices, as happened last year. In Europe, CRH said that there had been signs of firmer demand in a number of previously subdued economies, while the better performing economies have retained their momentum.

"The continuing successful recovery of significant energy cost increases remains a major focus across our operations," the company said.

It noted if the current euro/dollar exchange rate continued for the rest of the year, the currency translation impact on full-year pretax profits would be minimal compared to 2005.

In divisional terms, CRH said its European materials business is expected to show a broad-based improvement in first-half operating profit on 2005. Among the factors behind this is a further improvement in Irish construction activity in the first half.

Its European products business enjoyed a gradual pick-up in demand and a much improved first-half performance is expected, while the distribution business is expected to show a strong improvement on 2005.

In the US, CRH expects its materials division to report an operating profit in the first half compared to the more traditional first-half loss.

The group said its cash flow and financial position remained strong, although interest costs will be higher in the first half due to the substantial number of acquisitions made over the past year.