CRH share price collapse after profits fall by 77%

ALMOST €1.6 billion was wiped off the value of shares in building materials giant CRH yesterday, following the publication of a set of first-half results which included a 77% fall in pre-tax profits.

In total, pre-tax profits for the first six months of the year, at the largest publicly quoted Irish company, amounted to €25 million, down from €108m for the same period last year.

In addition to that, EBITDA (earnings before interest, tax, depreciation and amortisation) was down by 20% year-on-year, at €520m; operating profit fell by 51%, to €118m; and group revenue declined by 8%, to €7.66bn.

While the group has maintained an interim dividend payment to shareholders, unchanged from last year’s 18.5c, first half earnings per share were down by just under 80% on a year-on-year basis, at 2.6c.

The interim dividend was maintained because of what management referred to as the group’s “strong balance sheet and anticipated strong second half cash inflows”.

CRH’s share price started the day badly, before snowballing and pretty much single-handedly dragging the ISEQ downwards by nearly 6%. Ultimately, the company’s shares fell by 16.58%, or €2.33, to €11.70.

Management’s outlook for the full year has changed dramatically in the past month-and-a-half, since its last trading update in July.

At that time, it said second half EBITDA should exceed the same period of last year. However, yesterday, the revised expectation was that full-year group EBITDA for 2010 is likely to be down by around 10%, at €1.8bn.

While the company said that European economic indicators have become “more encouraging”, the big concern is coming from the US, where CRH’s Americas materials division is the number one player in the market.

Second-half profitability there is now expected to be down year-on-year by about 20% in US dollar terms due to weaker than expected volumes and more competitive pricing on the back of low levels of commercial construction work.

Management had forecast a year-on-year rise in that division. Group CEO Myles Lee said management remains focused on cost reduction and cash generation and that the business is “well positioned to respond to the current challenges”.

Net debt at the halfway stage was down from €5.12bn to €4.76bn year-on-year.