CRH considers €2bn expansion

BUILDING materials giant CRH said yesterday that it could very comfortably spend €1.5 billion to €2bn on acquisitions over the next year without stretching its balance sheet or putting pressure on its credit rating.

The Dublin-headquartered group — which reported a strong set of first-half results yesterday — stressed that while that figure is not a specific spending target, it has an “active pipeline of opportunities”.

Chief executive Myles Lee said that CRH is keen on expanding in developing markets such as Russia, Poland and the Ukraine, while China remains a significant element of future growth plans.

In the year to date, CRH has spent €380 million on investments and acquisitions, and Mr Lee suggested that figure could rise further before the end of the year, saying that the group has “substantial capacity for acquisition spend” and will look for opportunities in all markets. The group’s war-chest will be bolstered by the €500m-plus due to come in shortly from the forced sale of its 49% stake in Semapa.

Yesterday’s results, for the six months to the end of June, featured a 280% year-on-year increase in CRH’s first-half pre-tax profits, to €95m. Sales revenue for the period was up by 7% annually to €8.16bn, while earnings per share went from 2.6c to 10.7c. The first half also showed a 17% reduction — compared to the same period last year — in CRH’s net debt to €3.94bn, while its interim dividend for shareholders has been maintained at 18.5c. CRH’s first-half results compare favourably to the six global peers that have reported recently.

However, CRH said it is likely to come up short of full-year market expectations — of 11% earnings growth — due to raw material costs and slow economic growth.

“The positive outcome for the first half of 2011 clearly demonstrates the advantages of our product and sectoral end-use balance and the benefits of the extensive re-organisation and restructuring measures implemented in response to the exceptionally difficult markets of recent years,” Mr Lee said.

He added: “Looking to the second half, downward revisions to economic growth estimates over recent months, combined with the extreme turbulence evident in world financial markets over the past few weeks, have added to market risks and uncertainties.”

The best-performing business in CRH’s portfolio was its European distribution arm, followed by the corresponding division in the US. While Ireland only contributes 2%-3% of group revenues, and saw first half cement volumes fall by 19% year-on-year, the group said it remains committed to its home market.

The group said its cost reduction programme should see annualised savings of €2bn this year, with more cost-saving opportunities under review.