CRH dismisses designs on Tarmac

CRH is understood to be unlikely to move for any of the UK assets that road surfaces company Tarmac is being instructed to sell, despite speculation to the contrary.

Britain’s Competition Commission has provisionally ruled that the joint-venture between Tarmac — which is owned by international mining conglomerate Anglo American — and French building materials giant Lafarge could be damaging to competition in the marketplace and must dispose of a number of assets if it is to be approved.

The assets set to be sold are likely to include more than half of the companies’ combined ready mixed concrete (RMC) assets, and a number of quarries, asphalt plants and cement facilities.

The commission wants the cement and RMC assets to go to a single buyer, adding that such a move would be “the only way to get a new entrant, of sufficient scale, to break into the UK cement market and, thereby, ensure that this joint venture does not damage competition”.

CRH’s name has cropped up as a possible suitor for some of the assets, but despite the Dublin-based building materials giant being keen on buying cement companies and not having a sizeable presence in the British market (bar a small brick business and a cement export line) it is unlikely to budge from focusing on developing markets or those in which it already has a distinct presence.

“While CRH has one of the strongest balance sheets — especially post the proceeds from selling its 49% stake in Secil — we don’t believe it will be interested in such assets; however it will not stop management having a look,” noted Goodbody Stockbrokers yesterday.

“The key reason for this view is that it doesn’t offer an opportunity to scale up the business, as the UK market is already consolidated among the majors such as Cemex, Lafarge, Heidelberg Cement, and Tarmac.”

Meanwhile, CRH is due to issue a trading update next week, to coincide with its AGM. Noting better-than-expected first quarter results from US building products specialist Masco, Bloxham Stockbrokers said the single-digit revenue growth recorded by the firm “is supportive of positive momentum for CRH’s residential exposure to the US market”, which contributed 10% to earnings at its Americas division last year.