CRH pre-tax profit increases by 23%

Building materials giant CRH estimates that its 2006 pre-tax profits grew 23 per cent to approach €1.6 billion.

In a trading statement issued yesterday, the group said, against a background of falling US house building and higher costs, it had performed strongly in 2006.

Yet alongside the difficulties it faced, CRH said that acquisitions made over the previous 18 months had added €3.3 billion to turnover.

"As a result, full-year profit before tax is expected to be approximately €300 million ahead of the €1.279 billion reported for 2005; this would represent an increase of over 23 per cent," the statement said.

CRH said it expected another strong performance in 2007.

The group played down the likely impact of the ongoing decline in US housing construction which it acknowledged would hit construction demand in that country over the next 12 months.

The US accounts for just over half of CRH's business, but the Irish company says housing accounts for less than 10 per cent of this.

Its statement yesterday said the group expected to continue to benefit from the broad spread of its locations, products and customers.

The group added that despite recent weakness in the US dollar, by continuing to focus on its costs and its prices it expected to make further progress in 2007.

It said the outlook for construction in Europe this year was good.

The continent, which accounts for close to half its business, delivered improved growth last year.

Its Europe materials division delivered good first-half profits. However, the momentum picked up during the traditionally more lucrative second half to give what the group described as a very satisfactory advance on 2005.

Good contributions from acquisitions and strong underlying growth meant that Europe products delivered improved profit growth and operating margins. Europe distribution performed similarly well, resulting in improved operating profit.

CRH said its Americas materials business overcame higher costs and lower volumes to deliver good organic growth.

It expects improved profit growth and a strong underlying performance from Americas products.

Positive conditions mean that Americas distribution will deliver good profit growth and achieve similarly high margins to those it made in 2005.

Analysts reacted positively to the news yesterday, pointing out that CRH was poised to deliver profits ahead of general expectations.

In a research note following the trading statement, Aynesley Lammin of Citigroup recommended the Irish group as a buy and set a price target of €32.40 for the stock.