CRH share price falls 2.5% after warning on profits

BUILDING MATERIALS giant CRH’s share price fell yesterday after the group warned it is facing sharp falls in earnings and profits this year.

The news came as the multinational group announced it had bought a smaller rival in the US state of Missouri.

CRH said that has bought asphalt producer, Hilty Quarries, but did not reveal the price it paid for the business.

However, it did say it has spent €50 million on acquisitions since the end of June. It spent €280 million in the first half of the year.

Ireland’s biggest company said in a statement yesterday that poor weather, cost cutting and a foreign exchange hit would leave 2009 profit before tax at between €730 million and €760 million, less than half the €1.6 billion it recorded last year.

Its profits forecast includes a once-off €200 million charge for its cost-cutting plans – similar measures cost it €158 million last year – and €45 million for currency translation.

The group’s share price fell 2.46 per cent on the Dublin Stock Exchange yesterday as investors reacted negatively to the news. CRH closed at €17.46 last night compared with €17.90 on Monday. The fall knocked €300 million off the company’s value.

CRH manufactures, supplies and distributes construction materials across Europe and the US.

Its revenues and businesses are split roughly 50/50 across the Atlantic, although it has some interests in Asia.

The group expects earnings before interest, tax and write-offs to fall by one third this year to €2.66 billion. Its statement blamed poor weather in a number of markets in October and the extra cost of implementing new cost-cutting measures over and above those already announced this year.

CRH said trading conditions on the ground remain extremely difficult, with a like-for-like decline in third quarter sales of 19 per cent reflecting a modest improvement on the 21 per cent fall recorded for the first half of the year.

Group earnings before interest, tax, depreciation and amortisation (Ebitda) for the quarter fell by approximately 25 per cent compared with a reported 41 per cent decline for the first half of the year.

Cash flow in the third quarter remained strong, with a €0.9 billion reduction in net debt from €5.1 billion at the end of June to €4.2 billion a the end of September. This figure comprised gross debt of €5.5 billion and cash and liquid investments of €1.3 billion.

The company said that benefits from cost reduction measures, as well as more moderate energy-related input costs, had eased the rate of profit decline in the third quarter compared to the first half of the year.

“While trading conditions on the ground remain extremely difficult, our businesses continue to generate strong cash flow and to focus on commercial delivery through ongoing cost reduction and operational initiatives,” CRH said in a statement.

“With a strong balance sheet, we are well-positioned to cope with evolving trading circumstances and to take advantage of suitable development opportunities offering compelling value and strategic fit across our operations.” it added.