CRH has reported a better-than-expected set of results for 2005 as a strong performance from its US operations helped offset weakness in some of its European divisions. Jane O'Sullivan, Markets Correspondent, reports

However, the building materials group said it had entered 2006 with "good momentum" and is hopeful of a gradual improvement in Europe.

The company also expects a significant "kick" from acquisitions in the current year. The bulk of its 2005 purchases came in the latter part of the year and so did not make a full twelve-month contribution to the business.

Nonetheless, the company delivered a 16 per cent increase in pretax profits to a record €1.28 billion on sales of €14.4 billion, a rise of 13 per cent.

"While as always risks remain, the current business outlook is on the whole positive," chief executive Liam O'Mahony said. "A gradual pick-up in European economies seems broadly under way, which if maintained should bring good benefits."

The building materials group said it would pay a final dividend of 27.75 cent per share, an increase of 19 per cent, bringing the total dividend to 39 cent.

Shares in the company, which have risen by 25 per cent since November, lost 20 cent to €27.35 in a generally weaker market but analysts nudged up their forecasts for the group.

Both NCB and house broker Davy have raised their EPS forecasts by around two per cent to 210 cent per share.

The company, which spent €1.45 billion on acquisitions and development last year, remains on the lookout for further purchases.

"There is a significant pipeline of deals out there. We are talking to a lot of people and would be very disappointed if we didn't have continued success on the development front this year," chief executive Liam O'Mahony said.

The focus will remain on the company's core markets of Europe and the US.

Meanwhile, CRH again reported strong organic growth last year as its existing operations accounted for €137 million, or nearly 80 per cent, of the company's €175 million increase in pretax profits.

A divisional breakdown shows that operating profit from CRH's European operations improved by 7 per cent to €676 million.

While the materials division posted an 18 per cent increase in operating profits to €377 million, helped by good performances in markets such as Ireland, Finland and Spain, its European products division proved more disappointing.

It saw profits drop by 15 per cent to €176 million, as a sharp profit decline in its insulation business in particular took a toll in that area.

Its European distribution business turned in a flat performance, with operating profits rising by 2 per cent to €123 million. However, CRH expects the European business to benefit in the current year from a recovery in insulation, a pick-up in many of its European markets, particularly the Netherlands, and the benefits of last year's acquisitions.

Meanwhile, its US division continued to perform strongly, delivering a 22 per cent increase in operating profits to €716 million and it expects continued growth.

CRH said its US materials division recovered higher energy costs to increase profits by 20 per cent to €328 million. Recovery of energy cost increases will again be "crucial" for this business in 2006, CRH said.

Strong US residential construction activity helped its products division to record a 23 per cent profit increase to €308 million while profits in the US distribution business were up by 27 per cent to €80 million.