Inside the world of business
CRH Secil sale is goodbye to battered Portugal
CRH’S ANNOUNCEMENT yesterday that it has sold its 49 per cent stake in Portuguese cement producer, Secil, to its former joint venture partner, Semapa, for €570 million, draws a line under a row that has dragged on since late 2009.
In October of that year, CRH and Semapa ended up in a dispute over the future of Secil, a joint venture in which both companies had invested.
Semapa believed that the dispute triggered a clause giving it the right to buy out CRH, while the Irish building materials giant, believed that the issue should go for arbitration before the International Chamber of Commerce in Paris.
That is what happened and, last August, the arbitrator ruled that CRH should sell its 49 per cent stake to Semapa for €574 million. That has now gone through, and the net proceeds to CRH came to €564.5 million.
CRH originally paid €329 million for the stake and took on a €100 million share of its net debt when the deal was completed in 2004, bringing the total cost to €429 million.
It could be argued that the ruling is a defeat of sorts for CRH, as Semapa has succeeded in buying out its Irish partner, something it believed it had the right to do in 2009.
More realistically, the ruling means that CRH is getting out of a cement production business in a country, which, like the Republic, has been bailed out by the infamous troika – the ECB-EU-IMF – and whose construction industry is just as battered and bloodied as ours.
The sale will bolster the group’s balance sheet and give it extra resources for making further acquisitions.
CRH is likely to be looking at the other side of the world for at least some of those acquisitions. At last week’s annual general meeting, chief executive Myles Lee said it wants to step up buying activity in emerging markets.
This will include, when the option comes up next year, increasing its stake in another joint venture, Chinese cement manufacturer, Yatai.
Tom Parlon's great legacy from the boom years
THE “LANGER award” at the Bloomberg conference on the Irish economy in Dublin yesterday went to the former minister of state at the department of finance Tom Parlon.
Parlon, present in his capacity as director general of the Construction Industry Federation, seemed pleased when being introduced when it was mentioned that he had overseen the sale of State property during the boom years as part of the Fianna Fáil/PD decentralisation programme.
Yes, he indicated, he was due some credit for being part of the idea of profiting from the crazily high property prices that existed at the time and for selling some non-essential State assets. Close to half a billion euros was raised, he pointed out.
No doubt much if not all of this money came from the banks and has now to be repaid by the exchequer via the recapitalisation of the banks.
Pity that the Government’s reaction at the time to such high property prices was not to do something about them, and about the reckless bank lending that underlay the boom.
Caustic comment of the day came from economist Colm McCarthy, who took part in a discussion on doing business with China. It was his view that the Chinese would be most interested in Ireland for reasons to do with its dairy products and its thoroughbred industry. He thought the idea that Irish business would start producing widgets for export to China was a bit fanciful.
He’d had a look at the figures, he said, and the Republic exports about the same amount of stuff to Northern Ireland as it does to China.
“I don’t see any trade missions to Coalisland,” he added.
Barry O’Leary, chief executive of IDA Ireland, was also on the platform, but he didn’t respond.
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Struggling to get pension messageJUST 24 per cent of adults are putting money into a pension, according to the survey produced yesterday for the Irish Association of Pension Funds. And of those who are, a quarter figure they can get by contributing less than 10 per cent of the income annually – with a further 14 per cent having no idea.
No wonder, the pension industry professionals gathered yesterday for the Irish Association of Pension Funds annual conference on defined contribution pensions were at a loss to understand how to hammer home the importance of saving for retirement.
There was plenty of support for auto-enrolment – which would see workers automatically put into pension schemes when they get a job – and for lifestyling, the latest industry trend which aims to reflect the changing circumstances of pension scheme members as they approach retirement.
However, the fundamental problem remains that too few people are saving too little money, and therefore face a retirement of relative poverty, delegates warned.
Eunice Dreelan, head of portfolio management at Irish Life Investment managers, urged the industry to look to itself, noting that Ireland currently enjoys a high and rising savings rate, since the onset of the financial crisis but had seen pension savings stall over the same period. “There’s a disconnect there that doesn’t make sense,” she said. Despite the general acceptance that young people rarely think of pensions, and that parents with high mortgages and young children are also a challenging market, Joe Creegan of Zurich Life said the industry would have to try “an awful lot harder, especially in defined contribution, to engage and encourage younger members to sign up” including tapping social media and text.
For pension scheme members, the one good bit of news is that the demise of final salary schemes means the industry is now fully focused on making DC schemes a better prospect.
TODAY
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