|CRH, the global building materials group, was formed through a merger in 1970 of two leading Irish public companies, Cement Limited (established in 1936) and Roadstone Limited (1949). CRH accounts for about one third of market capitalisation on the Irish Stock Exchange and more than 80% of CRH's shares are held outside Ireland. About 2,000 of CRH's payroll of more than 90,000, are located in Ireland.
CRH, the global building materials group, today posted what the group termed "a robust set of results in a challenging business climate" with full-year profit before tax in 2008 of €1.63 billion, a fall of 14% compared to the record result in 2007.
CRH said revenues for the year were flat at €20.99 billion while earnings per share dropped by 11% to 233.1 cent from 262.7 cent.
Operating profits in its Europe divisions dipped by 5% to €1.05 billion, while operating profits for the America division fell by 19% to €792 million. The weaker dollar/euro exchange rate accounted for €67 million of this fall.
The board is recommending a final dividend of 48.5 cent a share, up 1% on the 2007 level of 48 cent. This gives a total dividend for the year of 69 cent, up 1.5%.
CRH said that it spent a total of €1 billion on acquisitions last year and has deliberately curtailed its spending activity in the second half of the year.
On the outlook for 2009, CRH said it will be extremely challenging. The first half of 2009 is expected to be sharply lower than 2008. It said the bad weather experienced in both the US and Europe in January and February will exacerbate the impact of already weak markets on the outcome for the first half of the year.
However, lower energy costs, ongoing interest rate cuts and the recently agreed US stimulus plan, should encourage some activity as the year progresses, the group said.
CRH also announced today that it is planning a rights issue which is expected to raise approximately €1.24 billion, net of expenses.
Myles Lee, Chief Executive, said today:“Despite a challenging backdrop, CRH performed robustly in 2008 and succeeded in limiting the decline in performance following 15 consecutive years of growth between 1992 and 2007. The outlook for 2009 is extremely challenging and management’s attention and efforts are resolutely focussed on commercial delivery and on ensuring that our businesses are strongly positioned through additional cost reduction and cash generation measures to cope with whatever trading circumstances may evolve. In addition, we continue to strengthen our financial flexibility in order to ensure that the Group is well positioned to take advantage, in its traditional long-established disciplined manner, of a likely increased flow of development opportunities as the year progresses.”
Goodbody analyst Robert Eason comments on the results.: "CRH has reported a 14.5% yoy decline in PBT to €1,628m (-12% on a constant currency basis). This was broadly in line with management guidance that PBT (profit before tax) would be in excess of €1.6bn and compares to our forecast of €1,619m. Given the detailed guidance given, there were no significant differences at the divisional profit level (only real variance was a stronger outturn for European Products offset by a weaker US Products). At an adjusted EPS level, CRH reported 239.7c, which was slightly ahead of our forecast of 238.3c. Year-end net debt came in at €6,091m, which was in line with our forecasts. To strengthen an already strong balance sheet (EBITDA interest cover of 7.8x), CRH has announced a 2 for 7 rights issue at €8.40 (c.45% discount to yesterday’s price) to raise €1.2bn.
This is to be utilised to pay down current facilities of €500m and provide flexibility for the group to take advantage of opportunities as the year progresses. Based on our forecasts and an assumption that EBITDA (earnings before interest, tax, depreciation and amortisation) interest cover can not go below 6x (i.e. management’s stated comfort level), we estimate that CRH will have the firepower to spend up to €3bn on acquisitions. As expected CRH has issued a cautious outlook and reiterated its January comment that 2009 will be “extremely challenging”. This is already factored into our forecasts which are looking for adj. EPS of 161c in FY09, representing a yoy decline of circa 30%, which in our view appears to be more bearish than management’s outlook, particularly with regard to its comments on the US.
Non-residential construction drives spend down more than expected in January
The latest US construction figures show that the annualised rate of spend declined by 3.3% mom in January (versus consensus of -1.5% and the previous month’s figure of -2.4%). This reflects the ongoing slowdown in residential and the biggest fall in private non-residential (-4.3% mom versus -1.2% in December) since 1994. An examination of the actual spend put in place on a monthly basis highlights the weakness that is emerging in some of the components of non-residential construction. Commercial and industrial construction spend was up 2.5% yoy in January, which represents a slowdown from 6.1% in December and +5.0% in November.
The weakest components in this category were commercial (retail etc) at -20% yoy (versus -15% in December), the eighth consecutive month of decline, and office -5.5%, the first yoy decline since 2004. The rate of growth in the Institutional element of non-residential construction (i.e. health, education etc) also slowed in January to 2.4% yoy versus 6.6% in December. Our forecasts for CRH factor in double-digit declines in the US non-residential sector, a segment which represents c.36% of the US business."