CRH profits increase 37%

Building materials giant CRH added more than €23 million to its value yesterday after the company announced a 37 per cent increase in first-half profits to €526 million.

CRH said pretax profits for the first six months of the year were €526 million, a 37 per cent increase on the €383 million it recorded during the same period in 2005.

Investors reacted by buying more than three million of the group's shares on the Dublin market yesterday. The stock traded at highs of €26.80 before closing 43 cent ahead or 1.64 per cent up at €26.60.

The increase added more than €23 million to its market capitalistion, which stood at €14.35 billion at the close of business. The group said that improved operating profits across its six divisions drove first-half growth. First-half sales grew 27 per cent to €8 billion from €6.3 billion in the first six months of 2005.

Operating profits increased by 38 per cent in the first six months of this year to €613 million from €445 million during last year's first half.

Earnings per share grew in line with profits, adding 32 per cent to 73.7 cent from 56 cent. The board declared an interim dividend of 13.5 cent per share, a 20 per cent increase in last year's first-half payout of 11.25 cent per share.

Chief executive Liam O'Mahony said the growth came from existing operations and acquisitions. He also pointed out that cutting costs had helped improve profitability across the group's businesses. "That's very much what CRH is about, chipping away at costs in order to deliver improved margins."

Its Irish businesses delivered €571.3 million in sales in the first half, a 2 per cent increase on the same period last year, while operating profits grew at the same rate to €71.6 million.

Sales at the group's Europe materials division were up 10 per cent or €118 million to €1.3 billion. Operating profits grew 8 per or €11 million to €152 million. However, operating margins dipped slightly to 11.4 per cent from 11.6 per cent.

Its Europe products business delivered a €297 million or 25 per cent increase in sales to €1.5 billion. Operating profits were up 30 per cent or €26 million at €112 million. Margins improved to 7.5 per cent from 7.2 per cent.

Acquisitions like the purchase of concrete producer Stradal boosted the division but the group said that it also achieved good organic growth during the period. Good performance in its DIY and builders' merchants businesses helped drive growth in its Europe distribution operation, where sales increased 30 per cent to €1.3 billion and operating profits were up 33 per cent at €66 million.

A mild winter and good private sector demand ensured that its Americas materials division delivered an operating profit of €35 million. The seasonal nature of construction in the US means that this operation normally loses money in the first half. Sales were up 31 per cent at €1.4 billion.

Sales at its Americas distribution business increased by 36 per cent to €1.8 billion, and operating profits were up 40 per cent at €202 million.

Last year half this division's sales came from the US housing market, which is currently slowing down. Mr O'Mahony said yesterday that an increase in non-residential building was helping to offset this, and said that residential construction activity was still significant.

He also argued that fears about the impact of the housing slow down were overstated. "What people don't realise is that the US population is still growing," he said. "If you look at the medium term, they reckon that the US is going to need 20 million new houses over the next 10 years" he said.