CRH shareholders lose 1bn over tardiness in disclosing asbestos action

THE tardiness of CRH in disclosing potential exposure to asbestos litigation cost shareholders over €1 billion as the share price plunged yesterday when the company finally went public on the problem.

The company has already paid out €2,649,900 to 33 claimants, and in a statement yesterday disclosed that companies in CRH’s distribution group in the United States have been named, together with a large number of other unrelated parties, in 244 pending cases involving a total of 251 claimants.

CRH shares fell by €1.05 billion on a day Irish shares fell 3.47%, wiping €2.02 billion off their value. In a statement yesterday, CRH said: “As part of its ongoing review procedures, senior group management has recently learned that certain of its operating companies have been named in asbestos litigation.

“CRH does not believe that this litigation will have a material impact on the financial position of the group.”

It emerged yesterday that about two-thirds of the claims were lodged in the 1997-’99 period and the incidence of claims has been declining since.

Commenting on the fall in share price yesterday, Merrion Capital analysts John Mattimoe said: “The market may be mostly disappointed with the fact that the cases were not previously disclosed, even if not considered financially material. The shares are down by 10% this morning, reflecting as much the market’s disappointment as the impact of any negative newsflow in this bear market.

“With the shares now trading on a 2002 price earnings ratio of just over nine times earnings, near historic lows, this fall may well prove to be an over-reaction.” Mr Mattimoe observed that last Tuesday, Wolseley’s share price fell by 12% after it disclosed it was involved in asbestos cases in the US.

They also stated the litigation is unlikely to have a material impact on it.

“While these cases may not have a material impact on CRH, any association with asbestos litigation is negative, particularly in the current stock market environment,” he said.

Wolseley recovered 10% by Friday’s close and this may have tempted CRH to make the announcement at this time. CRH said the cases allege personal injury as a result of exposure to asbestos in products manufactured by others and allegedly distributed by companies in the distribution group prior to ownership by CRH.

“CRH believes that these claims are without merit.”

The companies involved and the relevant insurance carriers are co-operating to defend these cases and to settle only on a minimal, pragmatic basis.

The companies have never suffered an adverse judgment in a trial court proceeding related to these asbestos cases.

“Based on its review and the nature of these cases, CRH does not believe that the outcome of any pending actions will have a material adverse impact on the financial position, results of operations or cash flows of the group,” CRH said yesterday.