Negative reaction to CRH results

BAD weather and currency factors had a negative impact on the results of Ireland’s top construction group in the first half with profits falling 18% in that period.

The CRH group which effected one of the biggest takeovers in its history some weeks ago saw its shares plunge 0.50 during the day to 16.55 as the markets reacted badly to the results.

Figures released yesterday show the building materials group achieved pre-tax profits of €161m for the first half of the year, a drop of 18% compared with the same period last year.

Some €10m of that drop was due to the weakness of sterling and the US dollar against the euro.

Sales fell 3% to 4.66 billion, while operating profits were down 17% to 245m. A 10% higher interim dividend of 0.082 cent has been declared. Earnings per share fell 17% to 0.2216.

Profits in the Republic of Ireland rose 14% to €68m, however, on the back of strong residential construction and infrastructure activity.

In the case of Britain and Northern Ireland profits were flat at €30m, mainly because of the weakness of sterling against the euro.

Continental European profits fell by a substantial 27% to €33m, hit by weak trading in the materials division, reflecting the pretty slow pace of the Eurozone economy during the period under review.

In the US, losses in the materials division continued unabated and increased from €30m to €39m, while the production and distribution division reported a 30% decline in profits to €99m. The US figures were also adversely affectedimpacted on by the stronger euro.

Chief executive Liam O'Mahony said a strong June performance meant pre-tax profits had been slightly stronger than indicated in CRH's pre-close trading statement. He said full-year profits should be ahead of last year, excluding adverse currency effects of around €77m.

The results were ahead of the group's earlier guidance figures from the group of €155m to €160m in its pre-close trading statement in June.

In a recent review of CRH, Goodbody Stockbrokers moved their stance on the group from 'Add' to 'Buy'.

Goodbody is sticking by that after yesterday's figures and analyst Robert Eason thinks the dip in the share price 'is a bit of an over-reaction' to the profit reversal in the first half.

He added that the figures were no surprise and it is not disappointing that CRH has delivered the set of figures it has.

"Also, bear in mind," also he said, "that the group had already indicated in their pre-close statement that they were expecting figures to be down, and by even more than the actual figures announced at the end of what was a difficult six month period for the group, for a number of reasons that were beyond its control."