Strong US performance boosts CRH earnings

A strong US performance compensated for weakness in Europe at CRH over the first half, allowing the firm to post a 20 per cent jump in profits. Results issued yesterday show that the building materials company recorded pretax profits of €383 million in the six months to the end of June, up from €319 million in the same period of 2004.

The growth came as turnover increased by 13 per cent to €6.3 billion and operating profits rose 20 per cent to €445 million.

CRH chief executive Liam O'Mahony said the results were based on "a tale of two continents". The company posted flat operating profits in Europe, while profits in the Americas increased by 68 per cent.

The American result was boosted by both volume and price improvements in the firm's US materials business and continued strength in housebuilding.

In Europe, trading was particularly tough in the Netherlands and in the firm's insulation business. The high point was a five-month contribution from Secil, the cement producer CRH part-bought at the start of this year. Without this, underlying profits in Europe would have fallen.

"It's just staggering to us how the economies on mainland Europe have stagnated," Mr O'Mahony said.

He was upbeat on the company's overall prospects for the second half of the year, saying the firm should deliver "further progress", particularly in the US.

He acknowledged however that the recent surge in oil prices would offset growth to some extent. If oil prices hold at current levels, the impact after price increases already levied by the firm should be more or less neutral, Mr O'Mahony said.

He rejected suggestions that the firm's US business could be hit by a housing bubble, saying the US residential market was well-supported by both population and employment growth.

"Housing bubbles are relative things," Mr O'Mahony said. "On the ground we're seeing sustained housing demand."

CRH also said yesterday that it had spent €190 million on acquisitions in July and August. This came in addition to a €231 million development spend over the first half, which was lower than the equivalent outlay in 2004.

Mr O'Mahony said the decline in acquisition outlay was linked in part to CRH's unwillingness to match the high multiples that private-equity firms are prepared to pay for deals in the sector. The company continues to "work actively on opportunities across operations", he added.

CRH will pay out an interim dividend of 11.25 cent per share, up 17 per cent on 2004.

When asked about allegations that a $1 million (€820,000) bribe was paid on behalf of CRH to a former Polish government minister in 1995, Mr O'Mahony repeated an earlier statement that the company did not know of or authorise any such payment. He acknowledged that the firm had made a donation to a charity headed by the Polish first lady but said this had been done "in the full public spotlight".

Shares in CRH fell 63 cent to €21.65 last night.