CRH 2003 profits to beat forecasts

BUILDING materials group CRH gave shareholders a pleasant surprise yesterday when it said its 2003 pre-tax profits would beat expectations and match the previous year's figure of €856 million.

The market had expected profits to fall as a result of the slide in the dollar against the euro. Currency movements cost the group€86 million during the year. This was offset by income from new acquisitions and a strong performance by the group's Irish cement and concrete operations.

Yesterday's trading statement said profits would have been 10% higher than the previous year if the effects of currency changes were excluded. CRH said the first half of 2003 saw business affected by poor weather conditions in both Europe and the US, which slowed construction activity and hampered demand for the group's products. Business recovered strongly in the second half.

The group said it faced 2004 with confidence in spite of uncertainties regarding currencies and economic issues.

CRH's figures were 6% ahead of most analyst forecasts. Davy analyst Joe Burnell said he expected further good progress from CRH in the coming year as market conditions improved and the benefits of CRH's ongoing acquisition programme kicked in.

The group spent over €1.6 billion on acquisitions and investments during 2003, including the €693 million purchase of Dutch cement group Cementbouw in July. The Cementbouw acquisition was the largest ever undertaken by CRH and was of similar size to Royal Bank of Scotland's takeover of First Active.

The group's operations in Britain and Northern Ireland suffered from sterling's 9% fall against the euro, but profits were broadly unchanged year-on-year in euro terms due to a stronger operating performance. CRH said its Ibstock brick subsidiary benefited from better prices and cheaper gas costs, while the group's concrete, insulation and fencing operations also performed well.

The mainland Europe materials division delivered a strong second half, with good performances in Finland and Poland. The division's operations in Spain suffered from pricing pressure in spite of bigger volumes.

Deteriorating political conditions depressed demand in Israel, but cost reductions and improved efficiency helped to maintain a satisfactory performance. CRH said demand in its products and distribution division remained subdued in Europe but that new acquisitions on the continent brought a strong advance in overall profitability.