Opportune time for CRH

CRH has been at the forefront of the rationalisation in the European cement and building materials industry, and the indications are that the industry is in for a further shake-up with some of the smaller players being swallowed up.

Few are in any doubt that despite its splurge of acquisitions in Europe and the US in the first half of the year, CRH will be in the frame for other big deals in Europe.

The pan-European building materials industry is becoming increasingly concentrated with seven major players, followed by dozens of small and medium-sized outfits who may find it difficult to survive as the process of concentration. The big six are headed by French giants Saint Gobain and Lafarge, followed by Swiss group Holderbank (the world's largest pure cement group), CRH, the two biggest British groups, Hanson and Blue Circle, and German giant Heidelberger.

That means large second-string building materials groups like Aggregate Industries, Rugby and Tarmac in Britain may become bid targets in the medium term. CRH would undoubtedly be interested in some of the assets of groups like these - in the same way that it was able to snap up the Scandinavian and eastern European operations of Scancem, while other assets went elsewhere.

But for all of that, the pan-European building materials sector has underperformed in recent months although CRH remains one of the blue chips of the sector, trading on a sizeable p/e premium to its British peers although it is still outshone in ratings terms by bigger European groups like Lafarge and Holderbank.

Merrill Lynch is still one of CRH's biggest fans and believes that the lads in Belgard Castle have a key edge in growth strategy. "CRH has our only intermediate and long-term buy recommendation. And the company's recent acquisitions of more aggregates businesses in the US, at cheap prices, right under its competitors' noses, shows why we believe CRH has the edge in growth strategy,"