‘Balance sheet is the strongest in business’

THE outlook for CRH contains a lot of uncertainty. With operations in 35 countries and something like 3,700 locations uncertainty has to be factored into any assessment.

For the past three years the CRH shed nearly 20% of its workforce from 93,500 to close to 76,000.

The group expects cumulative annualised savings over the five years 2007 to 2011 to be €2 billion, from the cost cutting programme, of which €0.5bn was realised in 2010. The total cost of the plan is estimated at €403m, of which €367m has been spent to date.

The group, whose core markets embrace Britain, mainland Europe and the US, has demonstrated its willingness to meeting the challenges it faces. But market conditions, despite the cost savings, will determine the speed and the depth of the recovery.

In the US, house building is back to 25% of what it was at peak with about 500,000 houses built in the US last year against 2.2 million in 2006. The substantial highway spend, of which CRH is a big beneficiary, is getting back on track.

That could amount to over €500bn this year but group chief executive Myles Lee said it will be 2012 before the US sees a move to sustained recovery.

Energy costs are a factor for the group also with the overall energy bill for the group at about 9.5% of sales, according to Mr Lee.

Last year the group spent about €1bn on acquisitions and capital investment. Mr Lee said the group’s “balance sheet is the strongest in the business” and indicated substantial acquisitions will be a feature of 2011.

Citibank yesterday was “cautious” about the outlook for CRH. In an analysis of the results it said growth is expected in northern European markets such as Germany, Finland and Poland.

Benelux, France and Britain are expected to be a bit flatter while in the US, non-residential work is expected to decline again this year with growth returning in 2012.

It said the key to a better share price performance ahead “will be how much pricing power the group has to offset higher costs and whether any meaningful acquisitions come through,” it said.

Those trends will probably not become clear until into Q2 this year, it said.

Shares in the company were down over 2.85% in Dublin at the close of business last night, having lost 48c to €16.31.