CRH gets €100m profit boost

BUILDING materials' giant CRH's first half pre-tax profits will be ahead €100 million, according to Goodbody Stockbrokers which has upped its target price on the company's shares.

Goodbody analyst Robert Eason has released a 29-page report on the Irish company which has operations across the globe.

"CRH's recent upbeat trading statement confirmed the company is set for a significant rebound in H1 profits on the back of strong contributions from acquisitions and an improved trading environment. As a result we are forecasting circa €100.5m increase in pre-tax profits to €261.3m," Mr Eason said.

He cites key factors underpinning this growth as earnings contributions from the record acquisition €1.165 billion spend in 2003 and a return to more normal weather conditions in the US and northern Europe. CRH has already spent €667m on 21 deals in the first six months of this year.

"Our full-year forecast imply PBT of €990, which implies year-on-year growth of 14%-15%. On a constraint currency basis, we estimate growth will increase by circa 20%, the highest rate of increase for five years," he added.

The Goodbody analyst has also upgraded the shares target price to €23. They traded at the €18.78 level yesterday. Mr Eason acknowledges on the back of slowing global construction markets, the last two years have been difficult in CRH's sector.

"This is evident in CRH's performance over 2001-03 with PBT growing by only 4% per annum, which compares to growth of 26% per annum in the prior 10-years.

"However, our analysis and the recent trading statement confirm that CRH is well on track to return to strong double digit earnings growth and reverse the recent trend of declining returns," he said.

Mr Eason believes the improvement in CRH's performance is factored into the share price and says the shares remain at a discount.

"Based on this improved outlook, especially for returns and earnings growth, we believe a rating that is equivalent to the average of its five-year trading range is not demanding. Using the revised forecasts this implies a price target of €32 (previously €21.60)," he told Goodbody clients.

This is the third time Goodbody has upped its CRH forecasts this year. Its first half results are due on August 31 next.