CRH to pursue acquisitions and offer dividends despite 80% drop in profit

BUILDING materials giant CRH will continue to look for value-added bolt-on acquisitions in its emerging market operations and plans to maintain paying a dividend to shareholders, despite a tough first half which saw profits fall more than 80%.

Latest figures, released yesterday by the Dublin-based company, showed that it made a pre-tax profit of €108 million for the first half of this year – 82% down on the €606m first- half profit generated last year.

The slump was driven by a €74m restructuring cost and a €21m hit from negative exchange rate movements.

Group revenue, for the six months, was down by 15% at €8.3 billion. Operating profits of €241m, were down by 66% on the same period last year, EBITDA dropped from €1.1bn to €651m and first-half earnings per share dropped, year-on-year, by 84% to 12.2c.

Better news for shareholders was that the group’s interim dividend is up by 2c on last year at 18.50c.

The company is conservatively looking at an earnings-per-share figure of around €1 for the full year – which would be down from €2.33 last year.

Regarding the dividend payment, CRH chief executive, Myles Lee said: “Dividend is about outlook and we’ll look at the prospects of the full-year payment next March, based on how we see trading patterns going for 2010. The dividend payment is very important to us; we have a 25-year history of paying it to shareholders and we’re loathe to break that habit.”

Sales in CRH’s Americas division fell by 12%, year- on-year; with a 16% like- for-like sales fall evident in its European arm. However, overall net debt was down to €5.12bn at the end of June, from €6.56bn at the same stage last year.

Management said yesterday, that while further falls in profits will be evident in the second half of the year, the rate of decline is likely to slow – both in comparison with the first half and on a year-on-year basis.

“While overall group profitability in the second half of 2009 will be lower than in 2008, we will benefit from the aggressive cost reduction measures undertaken last year and to date this year and from more moderate second-half energy-related input costs than in 2008,” Mr Lee said.

While the group has cut back on its spending – capital expenditure rates were down by 50% in the first half, on a year-on-year basis – management did add that it remains on the look-out for further acquisitions. Some €300m was spent on acquisitions and investments during the first six months of the year.

New buys will likely be bolt-on additions to operations in emerging markets like Poland, Ukraine and Turkey. Strengthening its materials business in the US and its cements/heavy materials business in Europe are also favoured developments.