|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 94,000, are located in Ireland.
CRH reported today that profit before tax for H1 2009 - - the six months to 30th June - - at €108 million declined by €498 million (-82%) compared with the reported 2008 profit of €606 million. This outcome is after restructuring costs of €74 million and an adverse translation impact of €21 million principally attributable to the weaker average Polish Zloty exchange rate (H1 2009: 4.48 vs. H1 2008: 3.49).
Sales revenue at €8.3 billion fell 15%; operating profit at: €241 million, was down 66% and basic earnings per share at 12.2 cent was down 84% compared with restated 2008 (77.1 cent)
With good first-half operating cash flow delivery despite lower profits, and with expected strong second-half inflows, CRH said it decided that it is appropriate to maintain the interim dividend at 18.50 cent (2008 interim dividend adjusted for the effect of the March 2009 Rights Issue: 18.48 cent). The group said it will decide on and announce the 2009 final dividend in March 2010 after taking into account the economic, financial and trading outlook at that time and other relevant factors. The adjusted 2008 final dividend amounted to 43.74 cent.
The results include the proportionate consolidation of joint ventures in the Group’s income statement, cash flow statement and balance sheet while the Group’s share of associates’ profit after tax is included as a single line item in arriving at group profit before tax. Per share comparatives for the first half of 2008 have been restated to reflect the impact of the March 2009 rights issue.
CRH said since its Interim Trading Statement on 7th July, newsflow surrounding economic developments and financial markets has been generally more positive than during the first half of the year. These more positive indicators, if sustained, will take time to feed through to demand in its various markets and business segments. Meanwhile however, trading conditions on the ground remain extremely difficult and risks and uncertainties remain for the second half of the year.
Myles Lee, chief executive, said today:"While overall Group profitability in the second half of 2009 will be lower than in 2008, we will benefit from the aggressive cost reduction measures undertaken in 2008 and to date in 2009 and from more moderate second-half energy-related input costs than in 2008. As a result, the overall rate of profit decline experienced in the first half is expected to improve in the seasonally more profitable second half. Against this backdrop, the Group continues to focus on commercial delivery and cash generation while ensuring, through ongoing cost reduction and operational initiatives, that our businesses are strongly positioned to respond to and take advantage of evolving market and trading circumstances."
Davy analyst Barry Dixon commented: Strong cash flow performance the highlight in H1: "The overall outlook from the company is broadly unchanged from that issued in early July. Within this, the prospects for the Americas Materials division have improved as stimulus funds drive increased levels of activity. The outlook for US residential has also improved with greater evidence of stabilisation. Non-residential markets in the US remain weak.
The outlook for Eastern Europe appears to have weakened over the past two months. We believe this reflects the slowdown in Polish cement demand as infrastructure spending is not sufficient to offset a slowdown in other end markets. Conditions remain difficult in Ireland and Finland and in non-residential markets in core Europe.
Overall, this is a solid performance from the company with full-year 2009 and 2010 forecasts unlikely to change. This could mark the end of the downgrade cycle. The strong cash management will add further strength to CRH's balance sheet, allowing it to take advantage of inevitable opportunities in the sector. Finally, we estimate that up to 40% of the €1.45 billion cost savings announced to date are from overheads, which will provide significant operating leverage when markets start to recover.
We reiterate our 'outperform' rating."