Profits at CRH surge 71% to €275m

BUILDING materials group CRH delivered strong first-half results yesterday, with pre-tax profits surging 71% to €275 million.

The company benefited from significant contributions from new businesses acquired last year, as well as a resilient performance from existing operations, as they bounced back in line with improved weather that fuelled demand for its products.

Sales rose 22% to €5.7 billion in the six months to June. Chief executive Liam O'Mahony said markets had improved and were in better shape than a year ago. The group's second-half performance will suffer from higher oil and energy prices, rising input costs and a dollar that was stronger against the euro than at this time last year. But he was confident the group would report a healthy increase in profits.

Mr O'Mahony said the stronger dollar would knock €26m off the company's full-year profits. But he downplayed the impact of oil price rises, saying energy accounted for less than 10% of the company's cost base and was less significant a factor than labour.

Fluctuations in the oil price were more damaging to CRH than the actual price charged, because the group needed to move quickly to pass on the increase to customers, said Mr O'Mahony. If oil prices stabilise, even at a relatively high level, the company is no longer at risk from the time-lag in paying more for oil and putting up prices for its own products. Profits were flat at the group's Irish operations even though sales increased by 9%.

Ireland accounts for less than 7% of CRH's sales and 18% of profits, but was the only territory where margins declined.

The company blamed higher costs that could not be passed on because of strong competition. Sales in mainland Europe were up 48% to €2.3bn as the benefits of the Cementbouw acquisition kicked in. Figures from the Dutch cement giant, which was CRH's largest-ever deal when it was bought last year for almost €700m, were being included in the half-year figures for the first time. European profits were more than double the same period last year at €183m.

CRH also did well in its chosen markets in North and South America.

Sales rose 9% to €2.6bn, while operating profits increased from €60m to €102m.

Britain and Northern Ireland saw sales increase by 7% to €366m.

There was further good news for shareholders when the company proposed an interim dividend of 9.6c per share, a 17% increase on last year.

Mr O'Mahony said the expected strong performance in the second half meant the full-year dividend would see a similar increase when the time came.

Stockbroker Davy said it would upgrade its forecasts for CRH's full-year results based on yesterday's news. Davy analyst Joe Burnell said he expected CRH's profits to exceed his previous forecast of €980m and break the €1bn barrier for the first time.