CRH tipped for another big purchase next year

CRH is expected to make another large-scale acquisition some time next year as its cash generation improves and debt levels continue to decline.

The Dublin-based international building materials group is due, tomorrow, to update on its performance for the year to date, in what is widely expected to be a positive trading update.

On Thursday, management will detail its progress to shareholders at the group’s annual general meeting.

Speaking ahead of that activity, Merrion Capital’s chief investment officer, David Holohan, said that while CRH is likely to add more bolt-on buys this year, it could make another big one-off purchase in 2018, especially if it continues to lower its debt and the US market continues to improve.

Last year was a quiet one spending-wise as CRH focused on consolidating around €8bn worth of investment made in 2015.

The bulk of that spend went on buying assets offloaded to make way for the merger of European peers Lafarge and Holcim, but €1.3bn was spent on leading US installation products company CR Laurence.

CRH has already spent around €500m on eight acquisitions this year and Mr Holohan said that unless it spends another €500m before the end of 2017 it could carry out another €1bn+ mega-deal in 2018.

CRH’s management has already said it has the spending capacity to spend between €2bn and €3bn by the end of next year.

Although down nearly 6% on where it began the year, CRH’s share price jumped nearly 4% yesterday.

The stock benefited from the positive wave that swept over European shares following the first round of voting in the French presidential election, which put pro-EU candidate Emmanuel Macron in the driving seat ahead of the final round of votes next month.

“With the group having flagged the capacity to spend up to $2bn on acquisitions this year, further activity seems likely,” Davy Stockbrokers said in a preview note ahead of this week’s statements from CRH.

Elsewhere, it emerged yesterday that chief executive Eric Olsen has stepped down after two years at the helm of LafargeHolcim — after a probe into operations in war-torn Syria.

It leaves the world’s biggest cement company without a leader as it struggles to make a success of the merger between the French and Swiss rivals.

Mr Olsen will leave the company in July after the cement maker admitted it had paid armed groups to keep a factory operating in Syria.

An independent internal inquiry found protection payments made to intermediaries to keep open the Jalabiya plant in northern Syria were not in line with its policies.

“Significant errors of judgment were made that contravened the applicable code of conduct,” the company said, while adding that Mr Olsen was not responsible for any wrongdoing identified in the review.

Chairman Beat Hess has been named LafargeHolcim’s interim chief executive as it begins the hunt for Mr Olsen’s successor.

French prosecutors are also conducting an investigation into the group’s activities in Syria.

Two human rights groups have filed a legal complaint in Paris against Lafarge, saying some of its work in Syria may have made it complicit in financing Islamic State and in war crimes.

Additional reporting: Reuters