Purchase pushes CRH annual spend to €8bn

CRH has taken its committed spend for the current year to around €8bn on the back of another international mega-deal.

The Dublin-based international building materials giant yesterday announced the purchase of CR Laurence (CRL), a privately-owned Los Angeles-based glazing-focused building installation firm, for a total consideration of $1.3bn (€1.15bn), with the deal expected to close next month.

The US company looks set for full-year sales of around $570m this year, with pre-tax earnings set to amount to around $115m.

CRH is looking to build, via its similar, existing US entity, BuildingEnvelope, annual synergies of approximately $40m by 2017, on the back of the deal.

While the deal includes a deferred consideration of $86m, which will be payable over a five-year period; the purchase effectively brings CRH’s committed spend, this year, to around €7.7bn.

Yesterday’s announcement comes just weeks after CRH formally concluded the bulk of its €6.5bn transformational purchase of various international assets being offloaded in order to make way for the merger of European cement giants, Holcim and Lafarge.

While CRH’s management has said that its acquisition pipeline is stronger than it has been for some time, the group is now likely to row back on deals in order to lower debt levels and integrate the mega-deals it has done this year.

Transactions this year, €113m was spent in the first half, have pushed CRH’s net debt levels to three times its earnings.

Maeve Carton, the group’s finance director, said while smaller acquisitions will still be considered, the next year’s focus will be on integrating new buys.

She added that over the next 18 months, the group aims to lower its net debt-to-EBITDA level to 2-2.5 times.

Net debt currently stands at €1.2bn.

Ongoing divestments will help in that regard.

The group’s disposal programme, involving €1.5bn-€2bn worth of non-core assets, has been continuing with another €670m worth of sales taking place in the first half of this year.

That takes total divestment income from the current programme, to over €1bn, and the process is set to continue for the next few years.

Meanwhile, CRH’s chief executive, Albert Manifold remarked yesterday that the group is well-placed for strong performance growth in the US over the coming decade.

His comment came after the publication of CRH’s first-half results showing a 13% year-on-year rise in sales revenue to almost €9.4m; a 3.3% increase in pre-tax profit to €63m and an €18m jump in operating profit to €189m.

While underlying results for the European business came in broadly in line with prior expectations; it was a recovering Americas division which really drove the group’s performance in the six months to the end of June.

“We are on track to deliver another year of growth in 2015. Trading in the Americas has been good and, against a mixed macro-economic backdrop, underlying trading in Europe is broadly in line,” Mr Manifold said.

Davy Stockbrokers said it was likely to increase its full-year earnings forecasts, for CRH by 4%-5% on the back of yesterday’s update.

“Positive earnings momentum, combined with strong cash generation and rapidly declining debt, combine to make CRH the most compelling stock in the sector,” Davy analyst, Barry Dixon said.