Profits at CRH pass Eur1bn mark

CRH has passed the €1 billion profit mark for the first time after posting growth of almost 20 per cent for 2004. The performance was driven by both organic developments and acquisitions, although overall growth was held back by a combination of higher oil prices and unhelpful currency movements.

€€CRH chief executive Liam O'Mahony said 2004, the firm's 12th consecutive year of profit growth, had been a "landmark" year for CRH. He was cautiously upbeat on the outlook for 2005, promising to strive for "continuing progress".

Pre-tax profits for the year were up 18 per cent at €1.017 billion. CRH estimated that the growth rate would have risen to 23 per cent if currencies had remained steady over the year.

The profit result came as sales rose by 16 per cent to €12.8 billion, or by 22 per cent in constant currency terms. Acquisitions from end of 2003 and 2004 delivered a €1.5 billion uplift in sales last year, while organic growth boosted turnover by €727 million.

The results were welcomed in the market, with CRH shares climbing by 18 cent to close at €21.33. Joe Burnell, an analyst with CRH's company broker Davy, pointed out that on his new forecasts, the firm is trading at a discount of almost 5 per cent on most of its European peers. He described the stock as a "strong buy" and set a new price target for it of €24.

Investors will meanwhile be cheered by CRH's maintenance of its "progressive" dividend policy, with a final dividend of 23.4 cents to be awarded.

This lifts the full-year dividend to 33 cent, up 17 per cent on 2003. Analysts expect dividend growth to remain at this level for the foreseeable future.

CRH felt the impact of higher oil prices last year, particularly in its US markets, which deliver about half of group profits.

Mr O'Mahony said US price increases implemented by the firm in the early part of the year were cancelled out by higher energy costs in the third quarter.

This led to some margin erosion in the firm's US materials business, where profits rose only slightly in dollar terms and were down by 7 per cent when translated into euro.

Margin pressure was also evident in the Republic, which accounts for about a tenth of group profits. Sales in the Republic climbed by 10 per cent to €804 million over the year, but operating profits fell by €1 million to €129 million.

Mr O'Mahony described the Republic as a "very strong marketplace", acknowledging that the margin deterioration was "disappointing".

He said that competition has heated up particularly in the Irish readymixed concrete sector, with 36 new players entering the market over recent times.

Mainland Europe, which provides close to 40 per cent of CRH's operating profits, was in general strong for the group last year, with acquisitions playing a key role in the performance.

Mr O'Mahony said the firm was currently considering a pipeline of deals in a number of areas