|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). About 90% of CRH's shares are held outside Ireland. CRH's has a payroll of 79,000 and less than 2,000 are located in Ireland. It moved its primary stock exchange listing to London late last year and is a FTSE 100 company.|
CRH plc, which is headquartered in Dublin, Ireland and is the second-biggest
building materials supplier in the world, and the market leader in the United
States, today reported pre-tax profits of €117m for the first half of 2012
(H1) - - up 23% on €95m reported in the same period last year. Revenues for the
six months rose by 5% to €8.59bn from €8.17bn.
The group said trading results reflect a positive start to the year for our
Americas operations which benefited from favourable early weather conditions and
a generally firmer tone in construction markets in the United States. In
Europe however, trading was adversely impacted by very severe weather conditions
in February, and by deteriorating confidence as uncertainty continued regarding
Eurozone economic issues.
In the period, CRH spent a total of €256m on 18 acquisitions and investments,
up from a figure of €163m the same time in 2011.Myles Lee, Chief Executive, said today:
“Problems in the Eurozone, which have
intensified over the past six months, continue to erode consumer and business
confidence in the wider European economy. In the Americas, current trends
suggest that the benign early weather in the
United States has resulted in some pull-forward of construction demand, while
after good early momentum, the pace of
economic growth has tempered over recent months. Against this backdrop,
we expect that EBITDA for the year as a whole will be similar to last year’s
level.Across the Group, we are advancing further our
cost and efficiency programmes, adjusting our cost base in response
to evolving market demand. In addition, in the face of ongoing margin pressures,
sharpening our commercial focus remains a
key priority. We continue to optimise our cash generation capacity through
close attention to working capital management and capital expenditure, while
also maintaining our strong and flexible balance sheet.”
Barry Dixon of Davy commented: "The
company reported EBITDA (earnings before interest, taxes,
depreciation, and amortization) of €568m for the period, 4% below our €590m forecast and
slightly below the €574m reported in the same period last year.
There was a marked difference in the performance of the European and Americas
divisions, with profits from the European operations falling by 13% while
profits from the Americas divisions increased by 26% in the period. A few
observations are worth noting:
European Materials EBITDA increased by 11% year-on-year (6%
organic growth), driven by strong volume growth in Ukraine (+28%). Volumes in
Poland declined by 2%, significantly outperforming the market which was down 11%
in H1. Volumes declined by a disappointing 13% in Switzerland while volumes in
the Chinese associate declined by over 20% in H1. Margins in the division
increased by 20bps excluding an €18m positive impact of pension restructuring
Profits in European Products declined by 18% on an organic basis, driven by a 5%
fall in like-for-like (LFL) revenues. The decline in revenues is similar to that
experienced in the first four months of the year with Benelux particularly weak.
Profits in the European Distribution division fell by 29% on an organic basis on
revenues which were 7% lower on a LFL basis. Weakness in the Netherlands, as
well as increased price pressure in Switzerland, were among the main causes of
Americas Materials enjoyed a better-than-expected performance driven by 6%
growth in asphalt volumes and a 5% increase in prices. Combined with higher
aggregate volumes and prices, this resulted in organic EBITDA growth of 12%.
Margins increased by 20bps.
Profits from the Americas Products division increased by 15%, driven by a strong
performance from the pre-cast business. Profits in the Americas Distribution
division were lower than our forecast, increasing by 27% on an organic basis,
driven by 5% top-line growth. Margins increased by 20bps.
The company impaired its 26% investment in Uniland (Spain) by €130m — the
original investment was €300m — and reported a profit on disposal (mainly its
stake in Semapa) of €196m.
In terms of outlook, management indicated that top-line growth in its European
operations is likely to be worse than the 5% decline reported in H1. In the
Americas, LFL revenue growth is expected to be well below the 8% growth reported
On this basis, full-year EBITDA is expected to be broadly in line with the 2011
out-turn. This is c.5% below our current (and consensus) forecast. It is likely
therefore that we will reduce our FY 2012 and FY 2013 forecasts by 4-5%.
Net debt was just over €3.9bn, in line with the level reported at the end of
June 2011 and above the €3.5bn reported at the end of December. This includes
the impact from the inflow of proceeds from the Semapa acquisition, offset by
the normal seasonal uplift in working capital, capex of €314m, acquisition spend
of €227m and a negative currency translation impact of €73m in the first six
months of the year.
The company has maintained its interim dividend of 18.5c.
DAVY VIEW: The results and outlook reflect a more cautious (and realistic) view
of the European construction sector with American markets also showing some
signs of moderation from the strong first half. A 5% reduction in our FY 2012
forecasts implies an EPS of c.87-88c for FY 2012. At the current price of 1550c
per share, this results in a P/E of over 17.5 times which is at the upper end of
the sector range. While the company continues to have one of the strongest
balance sheets in the sector and its robust cash generation will continue to
support an unchanged dividend, the valuation is pricing in an imminent recovery
in construction markets which at the moment is difficult to see."
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