CRH builds up €100m profits

IRELAND’S record breaking residential building boom helped to boost profits at CRH by €100 million since January but the boss of the building material giant says the boom cannot last indefinitely.

CRH chief executive Liam O’Mahony said while the extent of the residential property building splurge has taken people by surprise it is not likely to come to an abrupt end but will result in demanding slowing.

“The present level of demand will taper off. It is hard to conceive it will stay at this level indefinitely,” Mr O’Mahony told the Irish Examiner yesterday.

In a pre-close trading statement CRH forecast a 62% jump in first-half profits, due to strong demand for new houses, the benefits of recent acquisitions and an improvement in the weather.

CRH shares traded 2.32% higher to close at €18.01, up 41 cents on the day, following the very positive trading statement.

CRH, one of the world’s top four suppliers to the building trade, expects pre-tax profits for the six months to June 30 to be around €100m higher than in the same period last year, when they hit €161m. The firm said Ireland’s residential construction grew strongly in the first half while commercial and industrial activity remained flat.

“After the expected slow start, infrastructure activity has accelerated in recent months. While first-half volumes overall show a satisfactory increase on 2003 levels, prices have failed to compensate fully for cost increases,” the company revealed.

CRH, which has three divisions operating in 24 countries, said profits from its European operations in Poland, Switzerland, Finland and Spain would be significantly better than a year ago, while in Britain, the group’s earnings would be slightly higher.

In the US, CRH said it expected full-year pre-tax profit to show a healthy advance on the 2003 level, even after a weaker dollar crimps earnings by €32m for the 12 months.

Simon Brown, an analyst at Williams de Broe in London who has a buy rating on the stock, said there is still plenty of upside for CRH shares.

Mr de Broe said the Irish company’s performance justifies a higher share price compared with competitors such as the world’s biggest cement company, Lafarge SA of France, world number two Switzerland-based Holcim Ltd, and the biggest distributor of heating and plumbing products Wolseley Plc.

“There’s a lot of upside in the company, we see them as radically undervalued,” he said.