CRH, the building materials group, is preparing to step up its activities in all four of its geographical areas in the second half, ensuring that strong growth continues.
It will have a further six months contribution from Ibstock, the publicly-quoted brick manufacturer acquired last year, and contributions from a number of add-ons. It will not, however, have a contribution from Keyline which was sold.
Overall, the profit growth may be somewhat less than that achieved in the first half but growth is still likely to be substantial.
Growth should come from its main areas of operation. In the Republic, CRH noted strong job creation, good demographics and growing infrastructural requirements, which underpin buoyant construction activity. In Britain, interest rate reductions have contributed to a modest improvement in sector sentiment and outlook.
In mainland Europe, the economic outlook in the Benelux countries was generally positive, CRH said, but over-capacity in some sectors, particularly for clay and concrete products "is impacting prices". While the outlook in France and Spain is said to be good, Germany remains difficult. The Polish operation should make an increasingly positive contribution, reflecting recent price increases in an expanding market.
In North America, "the continuing strength of the economy and the gradual pick-up in TEA-21 funded activity augur well for the second half of the year". However, the second half of 1998 benefited from exceptionally good weather and these conditions might be different in the second half of this year. Also there may be a housing slowdown but the effects of this are expected to be countered by the company's materials side.
Although CRH's gearing has gone up from 39 per cent to 53 per cent, following the rise in the net debt in the first half to €1.04 billion (€819 million) from €563.6 million, it remains in a strong financial position. It generated cash-flow of €270 million from operations in the first half. This was boosted to €596.9 million after the proceeds of €299.9 million from disposals and the injection of €27 million from the issue of shares. However, outflows of €822.4 million - mostly due to acquisitions and investments of €423.9 million - led to a net outflow of €225.5 million. Following the total acquisition expenditure of a record €424 million in the first half - €1.3 billion in the year to date - CRH says its immediate management focus is to ensure the successful integration of the recent acquisitions. However, it is likely to continue with its policy of making appropriate acquisitions; contributions from these and underlying growth should ensure continued strong performance.
